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Forbes: Snack Attack

Entrepreneurs
Snack Attack
Christopher Steiner, 12.14.09

In 1993 Mandeep Arora rode shotgun on a vending delivery route. Even at age 13 he could see it made little sense: tromping up several flights of stairs with boxes of Snickers and Cheez-Its only to find machines still packed. Yet that's exactly what operators of vending networks expected their drivers to do. "It seemed like a huge waste of time," he recalls.

Those days may be over thanks to computer-monitoring hardware devised by Arora, now 29, and college pal Anant Agrawal. Their company, Cantaloupe Systems, launched in Berkeley, California in 2002, makes a 12-square-inch box that sits within a vending machine, captures all the transactions and transmits the data over cellular networks and the Web to Cantaloupe's servers.

The boxes also trigger e-mail and text alarms when machines sell out of an item. Result: less manpower and lower fuel costs. Not only can drivers skip machines that are fully stocked, but they also save time by prepacking their cartons with exactly what each one needs--allowing them to replenish 180 machines a week, versus 100 the old-fashioned way.

Cantaloupe's system costs $300 per machine, plus a monthly $6 service fee. The domestic vending market is huge, with 6 million machines (only 150,000 of which can't get a cell signal). Cantaloupe is in only 35,000 thus far, enough to pull in an expected $8.5 million in revenue this year, up from $2.5 million in 2008; the company has posted positive operating earnings (profit before interest, taxes, depreciation and amortization) since July. While the economy continues to shed jobs, Cantaloupe is looking for software engineers, account managers, field technicians and a technical writer.

Streamlining the vending process is an old idea. Two obstacles: clunky software and expensive, unreliable hardware. Arora and Agrawal started poking around, but the better systems on the market ran to $1,000 a machine. Then came cloud computing--programs managed on servers and distributed cheaply over the Internet. "We got lucky," says Agrawal. "Cloud computing and cellular networks were being stressed when we were in school."

Mark Stein, president of Mark Vend in Chicago, has installed Cantaloupe's hardware in 700 of his 1,700 machines, spread over a 50-mile radius. Over the course of the 12-month rollout Stein's overhead has dropped 15%. He hopes to have the boxes in all of his machines within the next two years. Says Stein: "Knowing exactly what you need is a lot better than guessing, which is what we used to do."

Arora and Agrawal met as undergrads at UCLA. Arora, whose parents ran a vending supply business in San Leandro, California, studied computer science, Agrawal economics and electrical engineering. Both had an entrepreneurial itch. On a vacation tour through India in 2001 the pair batted around a dozen ideas for startups (including a device allowing people to climb up walls without ropes), though vending seemed to have the most potential.

The pair spent the next summer interviewing vending operators in California. In the fall Arora quit working on a graduate degree in computer science to work on Cantaloupe full-time. The partners pooled $100,000 in savings--Arora had bet well on tech stocks, while Agrawal had a stash from assembling computers in high school.

A year later Frito-Lay came knocking. The snackmaker was experimenting with branded machines carrying only its products and wanted to track sales to learn what machines and locations were most effective. As a trial Frito-Lay wanted to install 100 boxes at high schools and on college campuses, but Arora and Agrawal had built only one prototype.

"We had a $30,000 check on our doorstep, and we weren't really ready," recalls Arora, who promptly turned his 900-square-foot Los Angeles apartment into a makeshift factory, thick with RadioShack boxes, wire crimps, laptops, serial cables and soldering irons.

By the next summer Cantaloupe had set up shop at Arora's parents' house in Berkeley. Over the next 18 months the two cranked out 1,000 units by hand in the garage. The following year they landed $1 million in angel funding and in 2006 another $5 million from Global Environment Fund, a venture capital outfit in Chevy Chase, Maryland.

Capital was nice, but snagging orders and filling them still proved tough. "I hung up on them four or five times before I agreed to sit down and talk with them," recalls John Sowell, chief executive of North County Vending in Vista, California, which collects $60 million a year in nickels, dimes, quarters and bills from 17,000 machines in seven states. A big problem: Cantaloupe's early software interface made it hard to mine the sales data. Sowell bought 30 units in 2005 but balked at a larger rollout for another year. "It took about that long for them to really perfect this thing," he says. At last count Sowell had installed 5,000 boxes, eliminating 40% of his truck fleet on Cantaloupe-streamlined routes.

Efficiency isn't the only benefit of computer-controlled vending. Foiling crooks is another. Cantaloupe's hardware sends a message any time a vending machine door opens. When a signal came from one of Sowell's machines that wasn't scheduled for service, a manager in the area swung by and nabbed a former employee pillaging the machine.

Such transparency also helps vending operators land accounts with commercial landlords, schools and municipalities, which typically pocket 5% to 25% of the vending revenue generated on their premises. To secure that valuable real estate, unscrupulous vending operators will offer commissions up to 40%. They get away with it by underreporting sales, effectively lowering the rate. Cantaloupe solves that problem by giving landlords access to the data stream.

Barton Shaw, vice president of Atlanta Vending, knows all about the number fudging. Last year Shaw took over a building with several machines from a competitor who had been reporting sales of $17,000 a quarter; Atlanta tallied $30,000 in its first quarter with the same number of machines. Shaw has since put Cantaloupe's system into 800 of its 2,600 machines, and he hopes to be monitoring nearly the entire network by the end of next year. "It's a big advantage when we pitch people," he says.

Next year Arora and Agrawal plan to integrate credit card readers into their hardware, potentially allowing vendors to charge more for the same candy. "There's a psychological ceiling right now at one dollar," says Agrawal. If snackers don't have to fish for coins, the logic goes, charging more than a buck won't hurt sales much. (The same behavior plays out in New York City cabs, too.)

Meanwhile, competition is brewing. Vending machine manufacturer Crane Merchandising Systems is working on its own monitoring hardware, as is Mars Electronics, maker of dollar-bill changers. Both companies' systems should hit the market within two years. While Cantaloupe doesn't hold any patents on its technology, Arora and Agrawal aren't sweating--yet. "Competition is good. It shows we're on the right track," says Agrawal. "But we're several laps ahead of everyone else."

NY Times: That Hobby Looks Like a Lot of Work

This article reminded me of a blog entry by Seth Godin:

Maybe you can't make money doing what you love

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December 17, 2009

That Hobby Looks Like a Lot of Work

By ALEX WILLIAMS

QUIT your day job?

To some craft enthusiasts that is just the name of a popular blog on Etsy, the fast-growing Web site that serves as a marketplace for crafts and vintage goods.

But to Yokoo Gibran, it was an epiphany.

Ms. Gibran, who is in her 30s, had been selling her hand-knit scarves and accessories on the site for less than a year when she decided last November to quit her day job at a copy center in Atlanta. Thirteen months later, she would seem to be living the Etsy dream: running a one-woman knitwear operation, Yokoo, from her home and earning more than $140,000 a year, more than many law associates.

Jealous? How could you not be? Her hobby is her job. But consider this before you quit your day job: at the pace she’s working, she might as well be a law associate.

“I have to wake up around 8, get coffee or tea, and knit for hours and hours and hours and hours,” said Ms. Gibran, who leveraged the exposure she got on the site to forge a deal with Urban Outfitters. “I’m like an old lady in a chair, catching up on podcasts, watching old Hitchcock shows. I will do it for 13 hours a day.” And even after all those hours knitting, she is constantly sketching new designs or trading e-mail messages with 50 or more customers a day.

“Etsy saved my life,” Ms. Gibran said. But, she added, “this is the hardest job I’ve ever had.”

These days, the fantasy of building a career on Etsy, an eBay of sorts of the do-it-yourself movement, is not just the stuff of dreams. Even before the recession, the site, which was founded in Brooklyn in 2005, was riding the “crafting” boom to prominence. When the job market collapsed, many hobbyists who already were selling jewelry or glassware as a sideline suddenly needed a real income.

While most people would find it impossible to meet a mortgage payment selling $8 crocheted mug cozies, some top-sellers on Etsy have moved beyond the stage of earning pocket money and are building careers — in some cases, earning six-figure incomes.

But even the successes add a note of “seller beware.” To build a profitable business on the site, they say — well, it’s a business. You need to build a brand identity, which often means courting design blogs or the news media. You need to manage distribution, which might mean standing in post office lines with a baby on your hip and a garbage bag filled with 30 self-packed boxes to ship. And as with any start-up, you need to maintain the morale of the labor force, which can be particularly challenging when you are the labor force, and the workday runs from “Good Morning America” to “Late Night With Jimmy Fallon.”

“Working from home, people think it’s so easy and great,” said Caroline Colom Vasquez, of Austin, Tex., who last year made $120,000 in sales from her Etsy shop, Paloma’s Nest, which specializes in ceramic and wood collectibles for weddings and other special occasions. But “there’s nobody there to tell you to take a break, or take a vacation.”

This year, she expects her business to have $250,000 in sales, but she will have to divide that with the three employees she just hired because Ms. Vasquez, who has a young daughter, could no longer handle the strain.

“I physically could just not do it in 24 hours,” she said. “My husband and I used to get up at 4 or 5 in the morning before the baby, then stay up till 1 or 2, stamping boxes, making shipping labels.”

As sales heated up for the holidays, Angie Davis, a former project architect in Minneapolis who lost her job last year, said her Etsy shop, Byrd and Belle, which sells handmade handbags and cases for iPods, laptops and cellphones, has “easily matched a month of architecture salary in five days, but I’m also working 16 hours a day.” To deal with the holiday rush, Ms. Davis said, she had to produce 112 cases in 48 hours, which involved turning her loft into a mini assembly line, where she cut leather and stitched and sewed cotton and wool fabric until 10 p.m. “It’s surprising how physical it can be on my core muscles,” she said. To get the work processed in time, she had to call in her mother from Iowa to help make tags and press fabric.

The number of people turning to Etsy as a full-time career is unknown. The site does not track how many of its members try to make a living, and it does not disclose the sales figures for individual sellers, said Maria Thomas, chief executive of Etsy. But over the last year, the number of registered members has more than doubled to 3.75 million, and the Quit Your Day Job blog on Etsy now attracts 2 million page views a month.

Several shop owners interviewed for this article, including Morgan Peterson, who runs a fashion label — Eliza + Axel — on Etsy, view their layoffs from traditional jobs as an opportunity to build a more fulfilling career online. In Ms. Peterson’s case, she lost her job as an assistant designer for Dillard’s and decided to create and sell her own line, made from reclaimed fabrics.

“In fashion school, they tell you you can do anything, they push you to be creative, but as soon as you get a job in a corporate environment, you’re only able to do certain things and it has to make money,” said Ms. Peterson, who said that she supplements her income on Etsy by selling wholesale to several boutiques. “With Etsy, I have my styles that make a lot of money, but I can also put work out there that I do just for creative reasons.”

As with eBay, start-up costs are a lot lower for people opening a “shop” on Etsy than a shop on Main Street; the site charges sellers 20 cents for each item listed and 3.5 percent of each sale. Etsy, which has a user base consisting largely of women, also provides a support network, including several blogs and forums where sellers swap tips and words of encouragement.

A healthy income, however, is far from guaranteed. After Tara Scheuerman was laid off from her job as an office assistant at a college in Milwaukee, she started a company, Cracked Designs, that sells greeting cards and wedding invitations on Etsy. After a slow start, she said she is thrilled to be selling more than 50 cards a week and is optimistic about her long-term earnings, but said she now spends more than 40 hours a week on her line, not only designing and making her products, but tirelessly promoting them on design blogs like Poppytalk and Design*Sponge as well as in magazines (her cards were recently featured in House Beautiful). So far, she said, she is earning about $15,000 to $20,000 a year, which on the low end works out to about $7.25 an hour — the same as Wisconsin’s minimum wage.

“You have to be really realistic with your goals and know you’re probably not even going to make a profit the first couple of years,” said Ms. Scheuerman, 26, who relies primarily on her husband’s income.

Such experiences were the focus of an essay, much-circulated among so-called Etsians, that ran last June in DoubleX, an online lifestyle magazine. In it, the journalist Sara Mosle (also a contributor to The New York Times) argued that Etsy was profiting off unrealistic expectations held by many women. “What Etsy is really peddling isn’t only handicrafts,” Ms. Mosle wrote, “but also the feminist promise that you can have a family and create hip arts and crafts from home during flexible, reasonable hours while still having a respectable, fulfilling, and remunerative career.”

But the experiences of at least some of the site’s successes, like Ms. Vasquez, don’t support that view. Still, Ms. Vasquez said, there is an unforeseen psychic tax even when — or especially if — one’s profit outstrips initial expectations. As her business, once a sideline run from the kitchen table, grew into a six-figure powerhouse, her work not only swallowed more rooms of her house, but also her family life. At dinners, she and her husband talked only about business.

“I felt like I was being a bad mother, a bad wife, being all-consumed by business. That was the breaking point,” she said. Ms. Vasquez has found time to exhale, at least occasionally, since hiring a staff. The family even took a trip, the first since she started the business, to the nearby Texas Hill Country.

Still, the challenge is to find balance. “What’s the point of doing something you love,” she asked, “if you are too exhausted to do what you love?”

Copyright 2009 The New York Times Company

NY times: On a Mission to Banish the Saggy Bottom

 

 

 

November 27, 2009

Advertising

On a Mission to Banish the Saggy Bottom

By CLAIRE CAIN MILLER and ANDREW ADAM NEWMAN

WHEN women try on pants, the first thing they do is turn around and look over their shoulders into the mirror. If Andy Dunn has his way, men will soon do the same.

Mr. Dunn, the co-founder and chief executive of Bonobos, an e-commerce company that sells men’s pants, is on a mission to give American men a complex about their backsides. The pants’ distinguishing feature is that they eliminate the sagging bottom of ill-fitting trousers.

“It’s like a shame campaign,” Mr. Dunn said.

As much as he is trying to improve the way men’s clothes fit, Mr. Dunn may be having more impact on the way men buy clothes. Bonobos, which is based in New York, has no stores in which people can try on the pants, even though its pitch is superior fit. Instead, it aims to use various Web technologies to make clothes-buying less of a chore.

Bonobos would not have broken even last year on $1.6 million in revenue if it had to pay for stores and sales clerks, he said. And the men it is focusing on — those who hate to shop and have not given much thought to the way their clothes fit — prefer the ease of going online and choosing from few options.

Most men have been brought down by “the revenue-maximizing Gap or Banana Republic cut,” made to fit the widest group of people, Mr. Dunn said. The secret to the fit of Bonobos pants, which start at $88 for basic khakis and go up to $188 for silk-lined wool, is the curved waistband, said Mr. Dunn, whipping off his belt to demonstrate how a properly fitting waistband arcs in the back. The $50 Gap versions do not curve.

•

Bonobos’ other co-founder, Brian Spaly, started making the trousers in 2007, while he and Mr. Dunn were housemates at Stanford Graduate School of Business. Mr. Spaly, a former athlete, could not find pants with both a slim waist and enough room in the rear and thighs.

The Bonobos pants, which come in straight leg and boot cut, are best for those with athletic builds, although it is developing pants for slimmer and bigger men.

Mr. Dunn is well aware that manufacturers could easily replicate Bonobos pants, so he is trying to distinguish the company with customer service, convenience and technology.

Many shoppers still prefer going to stores over shopping online because of the in-person help. But some unlikely online marketers have succeeded, like Zappos.com, the shoe seller that was acquired by Amazon.com for $1.2 billion this month. It offers free shipping both ways, allows returns for a year and answers customers’ questions on the phone and online.

Bonobos also offers free shipping both ways along with lifetime returns, and encourages people to buy and return several pairs of pants to find the right fit. Its so-called style ninjas are available by phone, e-mail and, soon, video chat, where they will assess fit and give style advice.

A few other online stores also sell men’s pants, with different marketing strategies. One, Cordarounds, is a two-man design shop that makes a rare item: pants made of corduroy with wales that run horizontally, instead of up and down. It manufactures a couple of hundred of each style and then moves on to the next. Another, called Bills Khakis, is more concerned with durability and comfort than the style and fit that Bonobos’ customers seek. It also sells in stores.

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Bonobos, named after a promiscuous species of primates, is now preparing to pitch the pants to women with advertisements on Web sites including Refinery29.com and Jezebel.com and in magazines like OK! The ads urge women to “give the gift that fits” to husbands, boyfriends, sons and fathers. “Let your man wear the pants this holiday,” proclaims the ad copy in the internally produced campaign.

Men are being pitched too. An ad for Bonobos that appears in the November issue of Men’s Journal features a photo of a male from the waist down, modeling pants under the headline, “Here’s your chance to tell women, ‘Hey, my eyes are up here.’ ”

The ad, by the New York office of the Gate Worldwide, continues, “When you wear the world’s best-fitting pants, women tend to stare. Even gawk. If you can handle being seen as a sex object, visit bonobos.com and order a pair.”

During Bonobos’ first year it advertised only on Facebook, aiming at affluent men in the financial sector; it now casts a wider net. “We have tons of customers who are school teachers, because they have to wear a comfortable nonjean every day, and those finance guys are actually wearing a suit four times a week,” says Scott Peterman, vice president for marketing.

One advantage online stores like Bonobos have over those in the mall is the ability to track exactly who buys things, which sizes and styles they prefer and whether they return them.

Eventually, shoppers on the Bonobos Web site will have a personalized home page, based on what they like and their size and body type. Bonobos is also planning marketing campaigns that will include surprising pants customers with a free dress shirt.

Bonobos, which could bring in $4 million this year, plans to stick to the few types of men’s clothes that have fit problems, a lesson learned the hard way when a swimsuit line sold poorly. Men, it seems, do not have a problem with swimsuits that cling or droop. Bonobos makes shorts and polo shirts and is working on dress shirts that do away with the “muffin top” created by excess fabric around the waist. And it plans to make suits.

Bonobos is “crowdsourcing” the design of the dress shirts using TweetSwell, a program for conducting surveys on Twitter, to figure out what people want. This has provoked heated debates over things like whether there should be a placket and whether cuffs should have one button or two. Even men who aren’t sure what a placket is (it is the vertical strip of fabric sewn onto the front of the shirt to reinforce the button holes) seem to care whether or not their shirts have one.

Only about 10 percent of men can be classified as fashionistas, said Marshal Cohen, the chief industry analyst at NPD Group, though that is up from 3 percent two decades ago. “I can’t tell you how many times I stop a guy in a store and say something doesn’t fit right, and he says, ‘I don’t care,’ ” Mr. Cohen said. “So he’s got a big hill to climb.”

Ray Kramer, 27, a debt researcher at Bank of America Merrill Lynch who calls himself a fashion novice, has already started the uphill trudge. His wife, Dominika Smereczynski, often complained about the way his trousers fit, and was relieved when the seat of his pants tautened, with Bonobos’ help.

On a recent morning, Mr. Dunn visited Mr. Kramer’s closet, and took out a pale blue Brooks Brothers dress shirt. “Billowing. Billowing!” he exclaimed. “You should throw this out.” Another, blue with black checks, was deemed as a source of muffin top.

Mr. Kramer began to nod. “I see most guys at work, even the skinny guys, with this big puff coming out the back,” he said. “It’s kind of embarrassing, I don’t have shirts that fit well.”

Mr. Dunn had succeeded at his goal of giving another guy a fashion complex. “Oh man, we can help him so much,” he said on the way out the door.

Copyright 2009 The New York Times Company

Forbes: The Snack King of China - Want Want

On The Cover/Top Stories
Extending His Reach
Russell Flannery, 10.19.09, 12:00 AM ET

At age 19 Tsai Eng-Meng took over his father's food business and promptly came up with an idea for a new product: crackers made from rice flour. It was unconventional--back in 1977 most crackers in Taiwan were made from wheat flour and took far less time to make. Then, when he traveled to Japan in search of technology from the Iwatsuka Confectionery Co., the 65-year-old boss told Tsai that he was too young to work with.

Tsai kept trying for two and a half years and finally landed a deal. Soon the family's Want Want rice crackers became a hit as gift packs for Chinese New Year and other holidays. They also became popular offerings at temples as Taiwanese asked for favors from deceased ancestors and powerful spirits. "Want Want relied a lot on people's prayers to ghosts and spirits at temples," he says. "When you go, you have to bring a gift. The spirits know what you want and what you leave behind."

Today the onetime teenage entrepreneur has turned the rice cracker maker into a snack empire. He moved into China in 1992, and, switching the focus to children (and their parents), Want Want China is now unrivaled in the country's rice cracker market, with a two-thirds share. It also has scored with flavored milk, where it controls 40% of the market, and has won 30% of the soft-candy business; it is also China's biggest maker of flavored frozen treats on sticks. Sales last year rose 42%, to $1.6 billion, and net profit, buoyed by its grip on high-margin rice crackers, climbed 30% to $263 million.

That performance helped propel Want Want onto our Fabulous 50 list of the best large listed companies in the region this year. Tsai, now 52, owns 47% of the company and ranked No. 246 on the Forbes Asia list of the world's billionaires in March with a fortune of $2.6 billion. On the list of Taiwan's richest people in July he placed No. 3, and his wealth had risen to $3.6 billion. His businesses, which include hotels, financial services firms, real estate and media companies that aren't part of Hong Kong-listed Want Want China (see box, p. 24), employ 45,000 people.

The road ahead for Tsai may get a lot tougher. Want Want, which is pronounced "Wang Wang" and means prosperity and fortune, is moving deeper into the beverage industry. Here it might face much bigger rivals such as Coca-Cola and PepsiCo from the U.S. and Tingyi, another Fab 50 member, from Taiwan. Tingyi is big in ready-to-drink tea and mineral water. (At the same time Want Want is planning to expand in instant noodles, Tingyi's mainstay.)

Yet Tsai is confident. He entered the fray with sweet milk for children in the 1990s, and today he sells it in unconventionally small kid-size packages; he charges twice as much per ounce as domestic rival Mengniu's white unsweetened version. And he says the company is "just getting started" in beverages. In his sights: fruit juice. This is a segment that's already crowded, plus dominating the $750 million rice cracker market is a lot different from barging into the $7.85 billion juice market. But juice sales are growing fast--8.6% this year--and because he already sells to China's booming hypermarkets and convenience-store chains, he should get good economies of scale from adding juice to the mix.

Tsai thinks his trump card in juice will again be customer convenience and packaging. This year Want Want started selling juice in soft, aluminum-based containers that feel like small bags and are popular in the U.S. "We're the first in China," he says proudly in an interview at the company's headquarters in Shanghai; Want Want relocated from Taiwan in 2001. Targeted at young women on the go, the new drinks fit into backpacks and pockets more easily than bottles. And the small nozzle means "you don't have to open your mouth as wide as with bottles," a point popular with women, he says, seated at a table lined with the company's snacks and drinks.

The way Tsai sees it, Want Want isn't going to be facing many new rivals in China. It's not easy for foreigners to gain entry--Coca-Cola's bid to add to its share of China's beverage market by buying juicemaker China Huiyuan was turned down by the Chinese government this year. Last month, after a long dispute, France's Groupe Danone pulled out of a joint venture that made the popular Wahaha soft drinks.

Yet the players already in the market are potent, and Tsai says he has to run hard as per capita income grows and the world's most populous country eats more. "If I can't increase sales to $10 billion within ten years, I may be squeezed out," he says. "Larger companies will look at each other and worry that they need to be bigger themselves."

The growth will come from drinks, and the key to success, he says, is to focus on profitable goods. "If your gross profit margin [for a new product] isn't 40%, you shouldn't to it," he says. "If it's that much, then you have the money to do enough advertising."

Tsai hasn't avoided failure. Mr. Bond coffee, launched in 2003, has been a dud. The company expected coffee to do well after the Beijing Olympics last year, but it didn't take off.

Underscoring the stakes if his margins don't hold up, Want Want's shares took a 10% dive in August after the company posted a rare loss in the first half. It blamed the early arrival of Chinese New Year this year, meaning that many orders for gift packages were on last year's books; a one-time gain in 2008 made the year-on-year comparison look even worse. With his stock still trading at 30 times last year's earnings, clearly few investors are willing to bet against Tsai.

Want Want traces its roots to 1962, when the company was founded in the northern Taiwan city of Ilan as I Lan Foods Industrial. Tsai's father, Tsai A-Shi, was a partner and semiretired when the owners decided to auction the company in 1977. The elder Tsai made the only bid and assigned his son, who had started working there as an assistant to the president a year earlier, to lead the business. Today the younger Tsai's own son, Tsai Shao-Chung, sits on the board.

Tsai succeeded with his cracker idea in part because Taiwan has ample, low-cost supplies of a key ingredient--rice. But the pivotal development for the company was Tsai winning over as a mentor the Japanese businessman who had initially spurned him. A statue of Iwatsuka's then leader Maki Keisaku graces the first floor of Want Want's 16-story headquarters. An Iwatsuka representative still sits on Want Want's board. The maiden flight in 2006 of Want Want's corporate jet, a Gulfstream ten-seater, was a sentimental journey back to Iwatsuka's head office. (Today Want Want is far bigger--its market capitalization of $7 billion dwarfs Iwatsuka's $125 million.)

Other symbolic gestures to the past abound at Want Want. Just outside of Tsai's office is an enormous painting of his childhood dog, Happy. While he was raising Happy as a teen, the dog was hurt in an accident. It bounced back, though, and today under the name "Yappy," his image is part of Tsai's collection of brands and mascots aimed at young consumers, promoting the rice crackers as well as products such as Aiyou yogurt drink, QQ Gummy sweets and O-Bubble fruit milk.

The common denominator across all of Tsai's products is Hot-Kid, the smiling cartoon boy in a tank top that serves as the company mascot. Overlooking the entrance of Want Want's headquarters hangs a pure gold 34.4-kilogram Hot-Kid logo.

Want Want's move into China changed everything for the company. It says that in 1989 it became the first Taiwan company to apply for a trademark on the mainland as decades of tension between the two sides began to lift. Citing a Chinese expression, he says of the move to the mainland: "The timing was right, the location was advantageous, and people were in harmony."

While most Taiwanese opening factories on the mainland looked to Guangdong and Fujian provinces because of easy access to ports or a similar dialect, contrarian Tsai in 1992 picked a spot in inland Hunan Province. The local government offered cheap land, but the town's name was an attraction, too: "Wangcheng," which sounds like "Want City." At first it was a disaster. "We didn't know what we were doing," says Tsai. The company had a hard time getting paid, even though consumers gobbled up its rice crackers as the flavor popular in Taiwan caught on quickly in China and there was little competition.

Want Want solved its collection problems, in part, with people such as Xiao Hujie. Xiao started with one truck in 1995 and went into business with his wife and one employee. Now he has ten trucks, including two that Want Want gave him, and a staff of 63. Tsai, says Xiao, is personable but doesn't waste much time on small talk. "He likes to ask about what's selling and what's not," he says. The original Hunan factory is still cranking out rice crackers, loading shipments into 70 trucks a day. Plaques lauding the company as one of the city's biggest taxpayers line the doorway. Changsha, the provincial capital, has a Want Want hospital. Now Want Want has 106 other factories around China and 10,000 distributors like Xiao.

Tsai says he ended up targeting kids in China partly because Want Want couldn't play up the religious element of its sales to templegoers that it used in Taiwan--the Communist government didn't allow it. It's turned out just as well, given China's huge population. "Where there are lips, there is a market" for his products, he says. And a big advantage was the similar taste in food across the Taiwan Strait. Aside from Want Want and Tingyi, Uni-President Enterprises also has been a big Taiwan winner in the mainland's food-and-beverage industry.

Over the years Tsai has tried his luck at different financial markets. He listed in Singapore in 1996 under the Want Want China name, making I Lan Foods a subsidiary. But the listing included his hotels, an approach that didn't interest investors, and the valuation never got very high. He restructured and listed in Hong Kong last year, and his shares have gained two-thirds since. The company also this year listed Want Want back in Taiwan. China is going to be a good bet for companies such as Want Want for years to come, he says, and that means his company should be a good bet for investors. "Compared to people from other countries, Chinese love to eat," he chuckled. "I have a lot of confidence."

MARKET SQUEEZE

Want Want is breaking into China's $7.85 billion fruit-and-vegetable juice manufacturing business, which is highly fragmented. Market shares of the top players for 2008:

China Huiyuan Food	6.0%
Yantai North Andre	5.5
Shanghai Jilong	4.5
China Haisheng	4.0
Shandong Tianfu	3.1E
Thai Beverage/Thailand	2.5

Sources: IBISWorld; All China Marketing Research.

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On The Cover/Top Stories
Nibbling on the Media
Russell Flannery, 10.19.09

It's not unusual for powerful businesspeople looking to ensure a public outlet for their views to invest in the media. In Taiwan legendary billionaire Y.C. Wang was successful in plastics and ran a marginal newspaper, too. Property developer Lin Rong San, who ranked No. 8 on the Taiwan rich list with $2.3 billion, owns the Liberty Times, a popular independence-leaning daily.

The latest entrant into the island's freewheeling media market: Tsai Eng-Meng. Using private money rather than funds from his publicly traded Want Want China, the snack billionaire bought publisher and broadcaster China Times Group from the Yu family for an undisclosed sum last year, outbidding Hong Kong's Next Media. Tsai followed that up with an investment in Hong Kong moneylosing broadcaster ATV.

Tsai says the main reason for his media foray is simple: He enjoys the industry. "Media is entertainment for me," he says. "My main business it still my main business. If Want Want is in trouble, I'm in trouble, too." So, says Tsai, investors don't need to worry that he'll be distracted from his core business.

Yet there's a profit motive to Tsai's media spending, too. He thinks the industry has good long-term investment prospects in the mainland's now-protected news arena. "Chinese have more and more money, and they will enjoy leisure," benefiting media companies that provide entertaining content, he says. He also sees synergy between Want Want's business and his media companies--at least some spending on snack ads will now flow back into Tsai's own pocket.

In divided Taiwan, where pro-China and anti-China groups can't agree on much, Tsai's purchase of the China Times sparked worries about free speech. Since his wealth now comes almost entirely from the mainland, critics worried he will try to turn the China Times Group into a mouthpiece for Beijing in Taiwan. Tsai disagrees, and so far, both he and his critics may be partly right. The newspaper has tilted its coverage toward China, yet the entertainment-oriented broadcasting business that Tsai coveted more than the newspapers is little changed, says Antonio Chiang, a longtime Taiwan media industry executive.

FT: Accentuate the positive

Accentuate the positive

By Luke Johnson

Published: October 13 2009 22:57 | Last updated: October 13 2009 22:57

Optimism is the elixir that makes everything possible. It sparks confidence – and that fuels ambition, which in turn triggers action. It leads to new inventions, new companies, new jobs and a higher standard of living. Without this sense of hope in the future, life is a grim affair, a kind of regression back to the Dark Ages.

This elemental lust for life is an amazing but intangible force; such instinct cannot be easily understood through scientific endeavour. But it can surely be either nurtured or discouraged, and it is up to us, each and every day, to decide if we want to look forward or back.

Important initiatives always require a leap of faith. I tend to find that those who are overanalytical struggle with real breakthroughs. They focus so much on the downsides they forget about the potential of the sunlit uplands. When making a big investment, there will always be a moment that you approach the precipice: all the material facts are known; negotiations have exhausted everyone; now for the decision – do you take the plunge or walk away?

This week, with partners, we bought some assets out of bankruptcy. As ever in such circumstances it was a chaotic process, the due diligence and contract full of gaps and conceivable dangers. We did what homework we could. Our lawyers, as they should, warned us of the worst-case outcome. But on balance, we felt the prize was worth the possible perils, and we forged ahead. Now we have to make the acquisition work: but with bold vision and great effort, I am sure it will prove transformative.

It is self-evident that emotion plays a large part in such matters. Most entrepreneurs I know love to believe they are solidly rational, especially when considering dramatic steps such as takeovers or product launches. But the truth is that when it comes to the crunch, entrepreneurs by nature allow the animal spirits to surge and tend to seize an opportunity. After all, no deal is ever a sure-fire thing – every innovation carries the chance of blunder. But for enterprising souls, the desire for gain overwhelms the fear of loss.

Unquestionably, the adrenaline rush of momentous events can lead to recklessness. The economic downturn has exposed great swathes of such folly. But winners in the game of capitalism calibrate the odds before they charge, reckoning that they can cope even if it all proves a mistake. I am all for proper enquiry beforehand, and sensible hedging where practical. But never demand a certainty: if you wait for that, you will be on the sidelines for ever.

This year it has been common to feel trapped in an almost universal mood of gloom. And if it’s not doomsayer economists, it’s environmentalists filling us with despair, or a beleaguered media industry delivering tidal waves of bad news. But such depressing predictions do not allow for the relentless tide of human ingenuity, and the sheer power of positive thinking. I cannot account for it, but enthusiasm, willpower and force of personality can achieve remarkable feats. There is no room for complacency, and no one said achievement is easy – but I believe there are solutions to almost any problem.

Plenty have suffered setbacks, but they will recover: short of death or prison, such reverses can always be overcome with persistence. Millions have been made redundant, lost their business or seen their investments shrink. But giving up is the ultimate tragedy. As someone once said, unless you have lost a limb and your house is on fire, your difficulties are just inconveniences.

Money is only part of the answer – more often, what is needed are unbounded conviction, a sense of aspiration, and a constructive approach. Plan for failure and you will not be disappointed, but if you concentrate on your strengths and apply yourself, something heroic may emerge. Psychology has an element of self-fulfilment about it; just remember that every year spring returns, that all our troubles turn into valuable experience over time, and that the world is more forgiving than you might imagine.

lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

Copyright The Financial Times Limited 2009.

FT: India serves up gherkins

India serves up gherkins

By James Lamont in Bangalore

Published: October 13 2009 11:27 | Last updated: October 13 2009 11:27

Over a rain-swept corner of a field in the southern Indian state of Karnataka, dark monsoon clouds are massing. Farm workers scuttle along muddy embankments heading for the shelter of a nearby seed store as strong winds pull at their clothes and a heavy shower begins to fall.

Yet the gherkin farmers of Medleri village in Rannebanur district are taking no chances with the monsoon. Their fields are criss-crossed with small rubber hoses fed by Israeli drip irrigation technology. Next to the seed store is a newly dug reservoir and a shiny pump.

It is not just the water that is different. Gherkin plants are sown and fertilised according to European methods. Experiments are tried from far afield. In one row, gherkins are grown up poles as they are in Vietnam. In another, the ground is under plastic sheeting, similar to what is found on the so-called Costa del Plastico in southern Spain. Mechanisation is also being slowly introduced, and Global Green, the company the farmers work for, has already developed a harvester to suit small acreages of its Indian operations.

However, gherkins – otherwise known as cornichons or pickled baby cucumbers – are shunned by Indian consumers.

Instead, the crops, which were once the preserve of US and European farmers, are now produced exclusively for export to suit the tastes of consumers in the US, Canada, Israel and Europe.

While India’s outsourcing prowess has become well known during the past decade in areas such as IT and back office business processing, the same trend is now under way in the global food supply chain – thanks to low labour costs and a climate that allows for three crops a year.

“Cheap labour and climatic conditions are the key drivers of agricultural production being outsourced to another continent,” explains Vineet Chhabra, Global Green’s managing director (pictured above).

Global Green digs deep in search for its next super crop

In Global Green’s boardroom, executives are searching for another crop to match the company’s success with the gherkin in global export markets.

The jalapeno pepper has shown the most promise. Favoured among the world’s Hispanic population, the pepper is one way of making further inroads into the US market. The company already has a prized contract supplying between 300 and 400 containers of jalapenos a month to the US prison service.

However, Vineet Chhabra, Global Green’s managing director, says that the jalapeno is too specialised and he is after a higher-consumption product.

The tomato is the crop that could really propel Global Green into the big league, he says, and into competition with farmers in California. The tomato tops fresh retail produce sales in the US.

Alternatively, the company might wait for demand for processed foods to rise in India as the urban middle class expands. He expects retailers such as Tesco and Carrefour to overcome regulatory obstacles in India to set up store.

“When they come in they will be like another cylinder of oxygen for us,” says Mr Chabbra.

“It’s more than about quality when you are supplying to the developed markets. You have to be 50 per cent better than others. The cucumber out of India is a wonder. It’s nothing to do with me. It’s the climate and the weather.”

Large supermarket groups are seeking out the cheapest agricultural suppliers and India is among a competitive peer group that includes Turkey, Ukraine and Mexico. Food company executives talk glowingly of the opportunities of “arbitrage at the Indian farm level”, where a day’s wage is a little above $1.

In Global Green’s sorting and bottling plant on the outskirts of Bangalore, Karnataka’s capital, bottles spin off the production line labelled for Lidl, the German discounter, Sobey’s, the US supermarket chain, and Safeway.

Global Green, a subsidiary of the Delhi-based Avantha Group, markets itself as the “World’s Pickle Packer”. It entered the gherkin business 15 years ago. Then, says M.R. Chandra Mouli, the company’s head of agri-business, it was a “small business”. Now, Global Green, which is headquartered in both Bangalore and Belgium, is the largest gherkin supplier outside of the US, the third-largest in the world, and accounts for a third of India’s production. Rival local producers include Natural Fresh Fruits, Green Pickles and Balaji Agro.

Global Green’s €26m ($39m) acquisition of InterGarden in 2006 gave it assets in Belgium, Turkey and Hungary. In addition to gherkins, the company supplies customers in 50 countries with onions, capers, peppers, cherries and sweetcorn. International expansion is still on the cards. In pursuit of year-round crop availability or four growing seasons a year, it is weighing acquisitions in Chile, Peru and Vietnam.

The company’s forecasts are bullish. It expects to treble turnover in the next four years from current revenues of $130m. When equity markets recover, it also has ambitions of a public listing on a stock exchange, possibly a foreign one. Gherkins will feature prominently in the prospectus. Last year, the company produced 65,000 tonnes of gherkins for global markets; 55,000 tonnes came from India. And, in spite of the global downturn, orders have held up. “Pickles are recession proof,” says Mr Chandra Mouli. “People are eating much more at home . . . Pickles sales – like peanut butter – are going up . . . But India has to be competitive. The yields have to be better.”

As a result, a productivity revolution is under way among the contract farmers of Rannebanur, most of whom tend small holdings. At one level they are like many farmers in India, concerned about the water table, subsidies, the availability of credit and labour shortages. But at another level they are at the sharp end of agricultural experimentation, contracted by a company pushing out middlemen with “seed-to-shelf” control and trying to bring them up to European standards.

Greater productivity among these farmers will widen Global Green’s profit margins. That quest has been championed in the Avantha boardroom where Gautam Thapar, group chairman, speaks of the benefits to be reaped by making Indian farmers even a little more like their highly productive German counterparts. The founders of India’s globally known IT companies, such as Wipro, Genpact and Infosys, once had similar conversations about how Indian graduates could take on the characteristics of their US counterparts.

If India’s “seed-to-shelf” agricultural outsourcing story seems to good to be true, it probably is. Mr Chhabra acknowledges the swift success of India’s gherkin crop and the bankable relationship it has opened up with big retailers. But he is under no illusions about the sheer unpredictability of farming. “It looks like a simple business. You grow a few cucumbers and put them in a jar,” he says. “It’s far more complex than that because there are so many moving parts. There’s the rain, the weather, fruit flies, the logistics, warehouses, barrel prices, foreign exchange and the customers. It’s hugely variable.”

The heavy reliance on nature, in a country where farmers depend on seasonal monsoon rains, makes some investors nervous. One UK-based analyst says India’s vulnerability to changing weather could dull investor appetite in Global Green if it tried to raise capital on global equity markets. But that caution is unlikely to slow Indian agri-business. Almost 200 years after the jar of pickled gherkins became a commercial product in France, at least one Indian company has taken it for its own.

Copyright The Financial Times Limited 2009.

NY Times: Real-Life Lesson in Using Google Adwords

The pressure is on... one week left before taking the Google Advertising Professional (GAP) exam!

===

October 15, 2009

Small-Business Guide

Real-Life Lessons in Using Google AdWords

By DARREN DAHL

Quick Tips:

• Set a budget, a daily or monthly amount you’re willing to spend.

• Begin by casting a narrow net, advertising in your local market and then expanding to additional markets like Google’s AdSense network.

• Try to choose keyword terms that your competition has overlooked to keep per-word costs low.

• Remember that good campaigns require constant adjustment.

Suggested Readings and Resources:

• Google’s step-by-step guide to getting started.

• Google’s blog about AdWords.

• AdWords for Dummies

It used to be that business owners often struggled to afford advertising for their products or services. Google AdWords has changed that by offering an inexpensive way to spread the word. But if you don’t do some careful planning, you can easily find yourself spending thousands of dollars with little to show for it.

Here are the basics: Google AdWords are keyword-driven ads that show up along the right-hand side of a Google search page under the rubric “sponsored links.” People who search for terms related to those you select — say, “widgets for sale” — will see your ad alongside the results of their search. How high up your ad appears on the list of sponsored links will depend on how much you’re willing to spend on your campaign. The more you spend, the higher your ad will rank. Because AdWords is a pay-per-click service, you pay Google only when someone clicks on your ad.

When you begin your campaign, you create a text-only ad that includes a link to your Web site. Then you select the keywords that will determine which searchers see your ad. You can — and should — specify how much you want to spend, what language(s) your ad will appear in and even the geographical reach of your ad. Google also gives you the opportunity to post ads through its content network, AdSense, which will place your ad on Web sites that offer content that relates to your keywords.

Googling the term AdWords will return dozens of pages of links to experts of all kinds promising to help you construct and optimize an AdWords campaign of your own. What follows are lessons learned the hard way by business owners who’ve actually taken the plunge:

Be Sure AdWords Is the Right Choice

Brent Hollowell and Jesse Travis, co-founders of a travel accessory retailer in Baltimore called Zen Class, had high hopes when they began using AdWords to promote their Nirvana Seat Back Organizer, which slips over an airplane’s seatback tray. While they knew they might get clicks if they paid for words like “travel accessories,” they feared the cost of close to $1.50 a click would be prohibitive because not every visitor would be looking for their product. They decided to be more specific and set up an AdWords campaign using the keywords “airline seat back organizer,” which cost about 5 cents a click; anyone who searched on that phrase would see their ad along the right-hand side of their screen. The problem was that the campaign, after running for several weeks, produced very few clicks on their site. They realized that most people were unaware that seatback organizers existed and thus were unlikely to search for one.

“Given the challenge of having a product that hasn’t existed before, AdWords may not be the best tool for generating interest and sales,” Mr. Hollowell said. He and Mr. Travis have found they get better results advertising through more traditional product-placement ads and using search engine optimization (S.E.O.) techniques to improve their site’s performance on organic Google searches.

Set a Budget

About a year ago, Georgette Blau, who runs On Location Tours in New York City, set up an AdWords campaign to promote tours that were timed for the release of the “Sex in the City” movie. In doing so, she says she made a mistake: She ran the ad on the Google AdSense network but failed to set a budget. An ad placed on the Google network can quickly appear on hundreds of Web sites and generate thousands of clicks. While this can be a good thing, it can also run up quite a tab. “Our ads were showing up everywhere, and we spent $600 before I could shut it off,” she said. Ms. Blau now sets monthly or even daily budgets for her campaigns to promote a “Sopranos” or “Gossip Girl” tour.

Focus on Local Markets

When Apple first introduced the iPhone, Matt McCormick, who runs a phone-repair business called Jet City Devices, saw an opportunity. Knowing that the iPhone’s screen was prone to damage, Mr. McCormick began bidding on keywords like “iphone repairs” and waited for business to flood in. A problem soon became apparent: while his site was swamped with traffic, very few people were actually mailing in their phones to get them repaired. But, after changing his campaign to run only on searches initiated within 50 miles of Chicago and Seattle — cities where he had physical shops where customers could drop their phones off in person — Mr. McCormick says his conversion rate jumped to 10 percent: “If you’re in business in only one or two cities, then Google’s localization feature can save you a ton of money, reduce AdWords competition, and bring great traffic.”

Narrow Your Keyword Net

Just as you might use quotation marks to limit the scope of a Google search, you can use brackets and quotes to focus your AdWords campaign. In fact, this is critical. If, for example, you select “widgets for sale” in quotes, your ad will show up anytime people search for those words — even if they search for, say, “blue or red widgets for sale.” If you use brackets to select [widgets for sale], on the other hand, only those people who search on the exact phrase will see the ad.

Catherine Wood, who runs an online designer clothing site called LaGrandeDame.com, suggests being selective about the keywords you place within those brackets or quotes. Ms. Wood said she followed Google’s guidelines when she set up her first campaigns this past April. “They tell you to try to choose the terms that will collect the most clicks,” she said. Ms. Wood began with 20 or so keywords such as “plus sized dresses” and “designer plus sized clothing” — somewhat general terms that she put in quotes. The result was that she received lots of traffic and quite a few customers. But, for the first four months she ran the campaign, she spent more than $5,000 a month, which meant she was spending more than $200 a new customer.

After learning her expensive lesson, Ms. Wood narrowed her keywords and used brackets to focus tightly on product names like [David Meister black dress] and [Anna Scholz Peacock Neru jacket] to drive very specific traffic to her site. She also learned the value of negative keywords — words you can specify (at no cost) so that people who search for them are blocked from seeing your ad. Ms. Wood, for example, stopped paying for clicks for anyone who searched for Halloween costumes.

Create Landing Pages

Ed Scanlan credits AdWords with helping build his company, Total Attorneys, a firm based in Chicago that provides outsource support to small legal practices. He suggests creating specific landing pages tied directly to the ad you’re running to maximize your chances of turning visitors into customers. Sending a visitor to your all-purpose home page can leave them feeling lost or aggravated. By contrast, if Mr. Scanlan runs a campaign based on a term like “legal case support,” people who click on the ad attached to those words land on a specific page designed just for them. These pages should ask users to take an action, like signing up for a mailing list or filling out a survey, to capture the visitor’s contact information.

Stay on Top of Your Campaign ...

David Metcalfe has used AdWords to promote XNet, a data center in Chicago. About a year ago, he noticed something strange was happening — his click-through rates were going through the roof. That sounds promising, but he was getting traffic steered to his site from a Web site in Spain — even though he had set his campaign for the Chicago area only. Mr. Metcalfe eventually got his money back from Google, but it took him six months of daily contact to do so. While this was clearly a fluke — and possibly criminal on the part of the offending site — it demonstrates two things: Pay-per-click campaigns carry risks, and the burden of monitoring them falls upon the owner of the campaign. “When you’re an entrepreneur dealing with a major corporation like Google, it can be hard to get someone to have a conversation with you,” Mr. Metcalfe said. “I was grateful I caught it when I did.”

... or Consider Outsourcing It

Monitoring an AdWords campaign requires a lot of effort. That’s why some entrepreneurs, like Rick Smith, prefer to outsource the management of their campaigns. Mr. Smith, who sells kitchen supplies online at chefsresource.com, says he originally set his AdWords campaign on autopilot. But he realized that while he was spending a good chunk of money each month, he didn’t know what kind of a return on investment he was getting. After attending an S.E.O. trade show near his home in Laguna Hills, Calif., about two years ago, Mr. Smith hired a firm to run his campaigns for him. The firm now tries new keyword combinations or ad text based on Smith’s latest inventory of cookware or knives. They update or change the ads on pretty much a weekly basis, adding in seasonal or holiday hooks when appropriate, and they monitor the results. In return for a percentage of his monthly budget, the firm sends him a weekly spreadsheet showing how much he has spent and how much revenue has been generated. “I’m spending less than I did when I did it myself,” said Mr. Smith, “and I’m getting more sales as a result.”

Copyright 2009 The New York Times Company

FT: There's a moral in this story

Excerpt:

As well as a good understanding of business and its success models, you need to have a strong moral compass. This is because your mentees are not just looking for business tips and contacts; they are also looking for guidance on how to make money, but not lose their souls in the process.

The key is to understand the difference between money and wealth. Money is what you have in your bank account; the more you have, the more successful is your business. Wealth is what you would have left if your money suddenly vanished: your knowledge, reputation and network. This a partial definition of the Chinese concept of guanxi.

My view is that the best way to increase your guanxi is to follow three simple rules: always treat people like you would wish to be treated yourself; help people wherever possible; and always tell the truth.

===

There’s a moral in this story

By Mike Southon

Published: September 14 2009 07:37 | Last updated: September 14 2009 07:37

It seems we are collectively going to be in debt for a long time. The good news is that the UK’s most ambitious entrepreneurs are gearing themselves up to pay off the national debt by starting and expanding new businesses as we come out of recession.

The long-term prospects for entrepreneurship in the UK are very good. I spend much of my time in schools and colleges where entrepreneurship is increasingly on the curriculum and well over half the young people I speak to have an aspiration to start their own business.

I sometimes visit inner city schools and I discover that the more “inner city” the audience, the more it understands the basic rules of entrepreneurship. Most of these schoolchildren are already living off their wits, wheeling and dealing; the only challenge is to keep them the right side of the law, away from “the dark side”.

I was at a business event at a Baptist church in Highbury, where a pastor spoke movingly about the social problems that lead to street crime. When he speaks to gang members,
it is clear they do understand the difference between good and evil, but excuse their behaviour on the grounds that this is the only way to thrive and survive – that is “how life works” for them.

This is a strange echo of the response I sometimes find when I outline an ethical way of doing business to groups of would-be entrepreneurs. They think that the poor behaviour they see on television programmes such as Dragons’ Den and The Apprentice and the excessive bonus culture, still prevalent in some areas, is “how business works”. I have to try and explain otherwise.

All I can do is detail my own experience, and what I have learned. I co-founded a company that was in the right place at the right time, and was sold five years later. But it was very difficult trying to explain to our staff why we had sold the company, and even stranger to realise that I had lost some close friends, who were jealous of my success.

Some 20 years later, after many mixed experiences in entrepreneurship, I can now put my experience into some sort of perspective. I have also just about worked out how to be a mentor, a role that is rather harder to perform than it seems at first glance.

As well as a good understanding of business and its success models, you need to have a strong moral compass. This is because your mentees are not just looking for business tips and contacts; they are also looking for guidance on how to make money, but not lose their souls in the process.

The key is to understand the difference between money and wealth, which was first explained to me by my friend Roger Hamilton, founder of The XL Group, a network of social entrepreneurs, educators and leaders. Money is what you have in your bank account; the more you have, the more successful is your business. Wealth is what you would have left if your money suddenly vanished: your knowledge, reputation and network. This a partial definition of the Chinese concept of guanxi.

My view is that the best way to increase your guanxi is to follow three simple rules: always treat people like you would wish to be treated yourself; help people wherever possible; and always tell the truth.

If you do, you will avoid the “dark side” and, in the process, might even make the world a better place.

mike@beermat.biz

Follow Mike on Twitter: http://twitter.com/mikesouthon
More columns at www.ft.com/mikesouthon

Copyright The Financial Times Limited 2009.

FT: Inventors are our greatest heroes

Inventors are our greatest heroes

By Luke Johnson

Published: September 1 2009 23:02 | Last updated: September 1 2009 23:02

Society has a curious attitude towards inventors. Their brilliance over the centuries touches all of our lives in countless ways, yet we mostly take their efforts for granted. Indeed, more often than not in Britain we caricature them as eccentric boffins, like Caractacus Potts in Chitty Chitty Bang Bang. This ambivalence is a mistake; to me, they are perhaps the greatest heroes of all.

It is a great shame that so much innovation now seems to stem from nameless teams inside large corporations. The whole idea of technological progress had so much more personality in the era of giants like Nikola Tesla and Thomas Edison. There are too few such inspirational figures around today to dazzle and excite. Perhaps the solitary ideas of one man (or woman) are not enough to produce real technological progress in the 21st century.

Yet the spirit of independent innovation springs eternal. I recently saw Flash of Genius, a movie based on an article (also now a book) by John Seabrook. It tells the true story of Bob Kearns, the professor who pioneered the intermittent windscreen wiper for cars. He showed it to the Ford Motor Company in 1969, but subsequently entered into interminable litigation with it, almost reminiscent of Jarndyce and Jarndyce in Charles Dickens’ Bleak House. More than 20 years later, he settled for $10.2m, but only after his legal actions had taken over his life.

Unfortunately, it appears patent infringement and suchlike is a fact of life for inventors. Sir James Dyson, the inventor of the bagless vacuum cleaner, talks in his autobiography Against The Odds – and subsequently – about various lawsuits against both Hoover and Amway. Knowledge of patent law and persistence bordering on the obsessive seem useful attributes if you want to be a successful inventor.

Inventors I have met are fundamentally motivated by a desire to see their creations become appreciated, rather than an urge to accumulate wealth

The subject of intellectual property and its protection is a contentious one. Industries like the pharmaceutical trade exist thanks to laws that allow them to enjoy temporary monopolies for original drugs. Vast, long-term research and development expenditure can only be recouped because of this complex system. But some would argue that charging high prices (which often bear no relation to the cost of production) for life-saving treatments is immoral. Certainly, the juicy profits enjoyed by big pharma in the US are part of the reason that healthcare costs there are so high. Yet we are all beneficiaries of their discoveries and formulations. I believe in freedom for enterprise, but I also think entrepreneurs must be allowed to reap the just rewards for their efforts.

Moreover, it is clear that some abuse the patent system to prevent progress. Too many patents are now issued, many of dubious merit – especially in the field of software patents. Patent trolls are those who file “paper patents” or “submarine patents” that they never intend to exploit, but merely use as tools to sue unwitting infringers. Both Research in Motion, maker of the BlackBerry, and more recently Microsoft have suffered from this type of behaviour, which acts as a harmful toll on endeavour.

Inventors I have met are fundamentally motivated by a desire to see their creations become appreciated and recognised, rather than an urge to accumulate wealth.

Tim Berners-Lee, the man responsible more than any other for the initiation of the world wide web, is a classic example of this attitude. He is a modest academic who has, I am sure, resisted countless overtures to make huge fortunes from the web, in order to carry on his role as one of its custodians.

Some inventors are almost dismissive of accountants and bankers – they say the money men do not understand the way creative minds work. Yet inventors must have a deeply practical streak: they need to think of ways to fabricate new things. They should be a combination of artist and engineer: with the vision to imagine a new device, and the ability to make it come to life.

We need inventors more than ever if we are to improve the world. From a cure to Alzheimer’s to better car batteries, there are thousands of urgent problems that need solving. History suggests the magical combination of technology, capitalism and brains is capable of meeting every challenge – despite the doubts of the pessimists.

lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

Copyright The Financial Times Limited 2009.

NY Times: Using 'Free' to Turn a Profit

August 30, 2009

Ping

Using ‘Free’ to Turn a Profit

By DAMON DARLIN

GIVING away a product has always been a great marketing concept. Even an unsavvy consumer can see a benefit in snatching free products. Free has also become a mantra for business gurus who advocate giving Web start-ups a shot at fast growth by bringing the price of most of their wares to zero.

But as a revenue generator, free can come up short. Sure, it attracts customers, but the challenge is to find someone to pay for it. Although thousands of businesses offer free services online — two of the biggest are the Flickr photo service from Yahoo and YouTube from Google — few can claim to be profitable. (Analysts say Flickr and YouTube are not.) While free is an enticing proposition, it is very hard to make it work.

Indeed, in just the last few weeks, eBay has been looking to shed Skype, the free Internet phone call service. And Sampa, a personal Web site creation service started by former Microsoft executives, folded.

Advertising was always the easy answer for making free pay. But that rarely covered expenses even before a glut of advertising space and a severe recession cut the revenue stream.

The fallback position is charging a few customers for premium service, in the hope that revenue from dedicated users will cover everyone else. A number of sites, like Flickr, do this.

Fred Wilson, the New York venture capitalist, codified this model and popularized a term for it: freemium. And he continues to receive an enthusiastic reception to the idea on his blog, A VC.

But the question remains. Just how does it work? Phil Libin, the chief executive of Evernote, a start-up in Mountain View, Calif., was kind enough to give me a tour of his privately held company’s financials to reveal the mystery.

The company gives away a Web application that saves data you accumulate. You can use it to keep a wide range of information: meeting notes and voice memos, for example, or even photographs of wines consumed or recipes found in magazines. The information is stored on the company’s computers so all the data can be synchronized on every computer the customer uses — and on smartphones as well.

Snap a picture of a business card with a smartphone like a Palm Pre or an iPhone and it shows up on the phone’s Evernote app — as well as on the Dell back at the office. It is searchable, right down to words in photographs. So if you type in “Samsung,” for example, every business card from that company pops up.

“It is a universal memory drawer,” says Mr. Libin, who has run and sold two other start-ups.

Evernote, of course, is free. That’s important because the company, which does no advertising, needs to acquire customers as cheaply as possible. “Our product is our marketing,” Mr. Libin says.

In 18 months, 1.4 million people have tried the service. An additional 4,500 try it each day.

“Free is not a loss leader,” he says. “If we can get a small percentage of users to pay we start to make money.”

How many times has a venture capitalist heard that? But Mr. Libin showed that the magic is not only that it takes just a small percentage of customers to turn red ink into black, but also that the longer they remain customers, the more profitable they become.

About 75 percent of the customers walk away within the first four months. That’s not worrisome, because the revenue from Evernote’s 500,000 active users is growing faster than the growth in the customer base. How? Customers discover that they need more than the basic storage space or want some extra features, like the ability to scan PDF documents for a particular word. Evernote charges them $5 a month or $45 a year for these and other benefits.

Mr. Libin studied the behavior of the earliest adopters and found that the longer customers used the service, the more likely they were to start paying for it. About 0.5 percent convert to paying customers in the first month. But after about a year, 4 percent have converted. (He says he thinks the figure will top out at about 22 percent.)

It makes sense. The shoebox of data is more valuable to the customer as it becomes larger. In addition, compelling uses — like photographing those business cards — quickly eat up the monthly allotment of memory, inducing a person to start paying. The longer the customer stays, the more valuable he becomes.

The company gets about 3 cents of revenue for each active user in the first month of use, but after a year that same cohort of customers is providing 35 cents each.

EVERNOTE made $79,000 from paying customers in July, Mr. Libin says.

That’s not enough to cover the cost of the engineers who design new features and the additional servers to store all the added data. But the cost of staffing doesn’t rise exponentially as more customers join, and the cost of adding storage declines because computing power keeps getting cheaper. (Electricity costs go up, but that is not a budget killer.)

The variable cost for each active user was about 50 cents a month when the company started, but has been dropping along a curve to 9 cents a month. By January 2011, Mr. Libin projects, the company will break even.

Mr. Libin’s model of freemium won’t work for every company. But it certainly could work for other companies who can retain customer loyalty and make their service more valuable over time while driving down costs.

It has convinced him and his investors that giving away the store is the right plan. “We are committed to being free,” Mr. Libin says.

Copyright 2009 The New York Times Company

NY Times: Wiggling Their Toes at the Shoe Giants

August 30, 2009

Wiggling Their Toes at the Shoe Giants

By AMY CORTESE

TODD BYERS was among more than 20,000 people running the San Francisco Marathon last month. Dressed in shorts and a T-shirt, he might have blended in with the other runners, except for one glaring difference: he was barefoot.

Even in anything-goes San Francisco, his lack of footwear prompted curious stares. His photo was snapped, and he heard one runner grumble, “I just don’t want the guy without shoes to beat me.”

Mr. Byers, 46, a running coach and event manager from Long Beach, Calif., who clocked in at 4 hours 48 minutes, has run 75 marathons since 2004 in bare feet. “People are kind of weird about it,” he shrugs.

Maybe they shouldn’t be. Recent research suggests that for all their high-tech features, modern running shoes may not actually do much to improve a runner’s performance or prevent injuries. Some runners are convinced that they are better off with shoes that are little more than thin gloves for the feet — or with no shoes at all.

Plenty of medical experts disagree with this notion. The result has been a raging debate in running circles, pitting a quirky band of barefoot runners and researchers against the running-shoe and sports-medicine establishments.

Vibram, with its FiveFingers line, is challenging the traditional idea of a running shoe.

It has also inspired some innovative footwear. Upstart companies like Vibram, Feelmax and Terra Plana are challenging the running-shoe status quo with thin-sole designs meant to combine the benefits of going barefoot with a layer of protection. This move toward minimalism could have a significant impact on not only running shoes but also on the broader $17 billion sports shoe market.

The shoe industry giants defend their products, saying they help athletes perform better and protect feet from stress and strain — not to mention the modern world’s concrete and broken glass.

But for all the technological advances promoted by the industry — the roll bars, the computer chips and the memory foam — experts say the injury rate among runners is virtually unchanged since the 1970s, when the modern running shoe was introduced. Some ailments, like those involving the knee and Achilles’ tendon, have increased.

“There’s not a lot of evidence that running shoes have made people better off,” said Daniel E. Lieberman, a professor of human evolutionary biology at Harvard, who has researched the role of running in human evolution.

Makers of athletic shoes have grown and prospered by selling a steady stream of new and improved models designed to cushion, coddle and correct the feet.

In October, for example, the Japanese athletic-shoe maker Asics will introduce the latest version of its Gel-Kinsei, a $180 marvel of engineering that boasts its “Impact Guidance System” and a heel unit with multiple shock absorbers. Already offered by Adidas is the Porsche Design Sport Bounce:S running shoe, with metallic springs inspired by a car’s suspension system. It costs as much as $500.

Some question the benefit of all that technology. Dr. Craig Richards, a researcher at the School of Medicine and Public Health at the University of Newcastle in Australia — and, it should be noted, a designer of minimalist shoes — surveyed the published literature and could not find a single clinical study showing that cushioned or corrective running shoes prevented injury or improved performance. His findings were published last year in The British Journal of Sports Medicine.

Other experts say that there is little research showing that the minimalist approach is any better, and some say it can be flat-out dangerous.

“In 95 percent of the population or higher, running barefoot will land you in my office,” said Dr. Lewis G. Maharam, medical director for the New York Road Runners, the group that organizes the New York City Marathon. “A very small number of people are biomechanically perfect,” he said, so most need some sort of supportive or corrective footwear.

Nevertheless, a growing number of people now believe in running as nature intended — and if not barefoot, then as close to it as possible. They remain a tiny segment of the population — some would say fringe. But popular training methods like ChiRunning and the Pose Method that promote a more “natural” gait, as well as “Born to Run,” a best-selling new book about long-distance running by Christopher McDougall, have helped spur interest.

Proponents of this approach contend that naked feet are perfectly capable of running long distances, and that encasing them in the fortress of modern footwear weakens foot muscles and ligaments and blocks vital sensory input about terrain.

“The shoe arguably got in the way of evolution,” said Galahad Clark, a seventh-generation shoemaker and chief executive of the shoemaker Terra Plana, based in London. “They’re like little foot coffins that stopped the foot from working the way it’s supposed to work.”

The big shoe companies are clearly paying attention to the trend. Nike was first to market with the Nike Free, a flexible shoe for “barefootlike running” with less padding than the company’s typical offerings. It was introduced in 2005 after Nike representatives discovered that a prominent track coach to whom they supplied shoes had his team train barefoot.

But some in the industry are critical of the barefoot push. Simon Bartold, an international research consultant for Asics, said advocates of barefoot running “are propagating a campaign of misinformation.”

SPEND some time in Concord, Mass., and you might catch a glimpse of a fit 51-year-old man in a pair of funny-looking socks running down the bucolic streets.

 

Tony Post, chief of Vibram North America, in the company's thin rubber running shoes. He says the industry is due for a shake-up.

That would be Tony Post, the president and C.E.O. of Vibram USA, on a lunchtime run. And those socks? They’re actually thin rubber “shoes” with individual toe pockets. Called Vibram FiveFingers, they’ve been selling briskly to runners and athletes looking to strengthen their feet and sharpen their game.

When Vibram, an Italian company known for its rugged rubber soles, designed the FiveFingers a few years ago, company officials figured that they would appeal to boaters, kayakers and yogis. Instead, the shoes, which sell for $75 to $85, caught on with runners, fitness buffs and even professional athletes: David Diehl, the New York Giants tackle, trains in them.

Mr. Post, a shoe industry veteran, said he believed that the business was poised for a shakeup. “It used to be all about adding more,” he said. “Now, we’re trying to strip a lot of that away.”

Strange as they look, the FiveFingers shoes hark back to a simpler time. Humans have long run barefoot or in flat soles. Professor Lieberman’s research suggests that two million years ago, our ancestors’ ability to run long distances helped them outlast their prey, providing a steady diet of protein long before spears and arrows. More recently, at the 1960 Summer Olympics in Rome, Abebe Bikila, an Ethiopian runner, caused a stir when he ran the marathon barefoot and won.

Things changed in the early 1970s, when Bill Bowerman, a track coach turned entrepreneur, created a cushioned running shoe that allowed runners to take longer strides and land on their heels, rather than a more natural mid- or forefoot strike. Mr. Bowerman and his business partner, Phil Knight, marketed the new shoes under the Nike brand, and the rest is history.

At the same time, millions of Americans began taking up running as a pastime. Those twin trends ushered in a golden age of biomechanics research. “There was a lot of concern about injuries because of the boom,” said Trampas TenBroek, manager of sports research at New Balance. The logic, he said, was that “if you build a heel lift and make it thicker, you take stress off the Achilles’ tendon.”

Walk into a sports store today and you’ll see the results: shoes with inch-thick heels and orthotics designed to correct overpronation, supination and a host of other ills.

Mr. McDougall, the “Born to Run” author, ” said manufacturers, doctors and retailers were doing runners a disservice by pushing such shoes. “People are buying it thinking it’s going to do something for them, and it’s not,” he said.

Mr. McDougall’s book is centered on the Tarahumara Indians of Mexico, known for epic 100-mile runs with nothing on their feet but strips of rubber. The book has become something of a manifesto for barefoot runners.

After suffering chronic foot pain and being advised by sports medicine doctors to give up running, Mr. McDougall tried thin-soled shoes. Now, he said, he runs long distances without shoes — or pain.

THAT seems to be a common experience among barefoot converts. “When people get it, it’s almost biblical,” said Mr. Clark at Terra Plana. His initial line of minimal shoes, the Vivo Barefoot, is intended for walking; a performance model, the $150 Evo, is due at year-end.

Sales of minimalist shoes, while still tiny, are growing at a rapid clip. Mr. Clark figures that he will sell 70,000 pairs of minimal shoes this year, double last year’s volume. The shoes have sold mostly online and through 10 Terra Plana stores worldwide.

Vibram says sales of its FiveFingers have tripled every year since they were introduced in 2006, and Mr. Post said he expects revenue of $10 million this year in North America alone.

Many professionals agree that while barefoot running may have some benefits, those who are tempted to try running barefoot — or nearly so — should proceed slowly, as they should with any other significant change to their running habits. They also say that more research is needed.

Sean Murphy, engineering manager for advanced products at New Balance, says that there have been many studies suggesting “that shoes can correct biomechanical abnormalities and risk factors, therefore minimizing the likelihood of injury.”

When asked for an example, Mr. Murphy pointed to a 2006 study by three doctoral students that found that wearing the appropriate type of running shoe for one’s foot could reduce the shock of impact or unwanted rotation of leg bones. The study did not address injury rates.

AMID all the controversy, barefoot running and natural gaits are the subject of intensive research across the shoe industry. Companies don’t want to miss out if it turns out to be more than just a fad.

At New Balance’s sports research lab in Lawrence, Mass., Mr. TenBroek and Mr. Murphy are studying the biomechanics of running barefoot and in soles of varying thickness, while designing a “lower profile” shoe.

Asics, too, sees promise in this area. “As technology improves, we will definitely go to a more minimal style,” Mr. Bartold said.

Those big companies could end up profiting from the movement — or they could have trouble getting on board.

Danny Dreyer, the founder of ChiRunning, which uses the tai chi principles of harnessing energy and core muscles to promote a more effortless way of running, said he had worked with a few shoe companies to help design minimalist shoes. In each case, he said, marketing and profit concerns trumped design: “Their profit and direction is based on ‘More shoe is better,’ ” said Mr. Dreyer, who is also a long-distance runner.

Mr. Bartold of Asics, which has not worked with Mr. Dreyer, said the industry had runners’ best interests in mind. “It’s all about trying to protect the athlete,” he said.

Nike describes the Free, its minimalist shoe, as a “training tool.” It offers models with varying degrees of cushioning; they are priced at $55 to $110.

“The key is to offer a range of options, because every runner has different needs,” said Derek Kent, a Nike spokesman. “If you want that sensation of barefoot running, there is the Free, but if you want a product with a little more cushioning and support, we have that, too.”

While Nike would not disclose detailed sales information, Mr. Kent said sales of the Free were growing at double-digit rates, with sales in Japan and China especially strong.

Curt Munson, co-owner of Playmakers, a running shop in Okemos, Mich., said that in his conversations with major shoe companies lately, “they see that they need to address this” but “they’re just not sure how much.” But, he said, they must be thinking, “If we say this is the best, then are we saying that what we’ve done before is not good?”

The back-to-basics movement is more than a fad, said Mr. Munson, who runs in FiveFingers. “Most people are not ready to run barefoot,” he said, “but I do think they are ready to go back to ‘less is more.’ ”

Copyright 2009 The New York Times Company

Oodles - Singapore's Twin Ply Noodles

Chance upon it while channel surfing and I didn't know that this has been around for some years.

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Some background on 2-ply noodles...

SP Noodles

The unique and novel idea of SP noodle is the creation of the 2-ply or multi-ply noodle incorporating different flavour, aroma, texture and visual attraction to the consumer.

SP noodles are created for the joyous celebration of the Singapore Polytechnic 50th anniversary. Three types of SP noodles having the combination of Spinach / Paprika, Sesame / Pandan and Soy / Pumpkin were developed.

The SP noodles were created and perfected by our Food option final year students at the School of Chemical and Life Sciences.

The students assisted in the testing of different natural and extracts of vegetables. The concentration and delivery systems of the extracts were optimised based on the types and processes involved. Textural profile and colour stability tests were evaluated with the texture analyser and colourmeter respectively.

The ingredients used in the SP noodles come only from natural and extracts of vegetable origin. Spices are natural from selected sources and all other ingredients are permitted food additives. No artificial preservative and flavouring are used.

The product has won the SIFST Food Product Award, Innovation 2005-2007. It has also been given the seal of approval by the Health Promotion Board as a healthier choice food. Products approved to carry the Healthier Choice Symbol (HCS) are lower in fat and sodium and are higher in dietary fibre, as compared to similar regular products.

An MOU has been signed with Kwong Seng International on 21 February 2005 and this led to the registration of a new trademark: oodles" .

Source: http://www.sp.edu.sg/SPweb/appmanager/cls/home?_nfpb=true&_pageLabel=About-CLS-Our-Products-SP-Noodles

===

These one-of-a-kind twin ply noodles were created in a local polytechnic. The unique marriage of Singapore’s research capabilities coupled with an entrepreneurial spirit has ensured that this product made its way to the local shelves. These twin ply noodles use the same concept as dual layered tissue paper, providing an extra spring that makes them both tender and delectable.

KWONG SENG INTERNATIONAL PTE LTD

171 Kampong Ampat

#06-09 KA Foodlink Building

Singapore 368330

Tel: (65) 6747 8895

Fax: (65) 6741 5983
Email: lawsew@pacific.net.sg

FT: Our well-spent youth

Our well-spent youth

By Emma Jacobs

Published: August 25 2009 22:10 | Last updated: August 25 2009 22:10

LAKSHMI MITTAL
Mailroom worker

London-based chairman and main owner of ArcelorMittal, the world’s biggest steelmaker
 
Growing up without much money gave me a strong work ethic and an appreciation of every chance I was given. Saying that, it was not easy to fit in both study and work.

My first Saturday job was working at my father’s steel mill in Calcutta. Actually, it wasn’t only a Saturday job. I was working there every day while also studying for my degree at St Xavier’s College in economics and finance.

University classes started at 6am and lasted until 10am. Then I would go and do a full day’s work at the office. I started off in the postroom. My father, who has always been my mentor, quite rightly insisted I start at the bottom and it was only as I showed my value that I was given more responsibility.

I learnt at a relatively young age that I had a genuine passion for the steel industry and that I would have to work hard to make progress. I still feel like that today.

Starting at the bottom gave me experience working with people at all layers of a company. As a chief executive, it gives you an appreciation that each position in the company has a value.

My time in the postroom showed you have to work hard and deliver results to make progress. It also reinforced the value of education, which many of us take for granted. I was working with people who had not had that privilege and who were doing everything they could to support their families.

When I left university, I was offered a position to teach advanced accounting. I seriously considered it until I realised I would have to start teaching at 6am. After years of getting up at 5am, I really wanted the opportunity for a lie-in so I turned it down and stayed on at my father’s company in India until I left for Indonesia in 1976.

Although, looking back, that hasn’t provided me with much chance for any lie-ins either.

SIMON WOODROFFE
Farm labourer

Founder of sushi chain Yo Sushi and Yo Hotel

As a teenager, I worked as a farm labourer and bus conductor, but my best job was a helicopter guide at the age of 17.

I had left Marlborough College at the age of 16, which was incredibly shocking to my upper-middle-class parents. It was the time of love and hippies. I felt I didn’t fit in at Marlborough and knew there was a revolution going on outside my door. I wanted a part of that.

My father, a senior officer in the army, wanted me to be a stockbroker or some other middle-class profession. At 17, I got busted for drugs and spent three months in a detention centre. By then I had really left the cosy confines of my middle-class world.

There are two moments in my professional life when the outcome exceeded my expectations. One was when I sold Yo Sushi for the third time – just before the marginal tax rate went up and the recession started. I got millions more than I had anticipated.

The only other bit of professional luck I’ve had was at 17 when I worked as a helicopter guide in Essex, where I grew up. The helicopters would spray the fields with insecticide and it was my job to mark out the areas to spray. There were no concessions to health and safety and I’m sure I breathed in lots of insecticide. But it was so much fun – occasionally, I got a ride in the helicopter too. And I earned £100 a week, which was a huge amount at the time. That kind of good luck never happens to me.

I went on to became a roadie, which was a working-class profession. The work taught me some really basic things: you’ve got to be on time for work or you get fired: you can’t charm your way out of everything. It also showed me that I quite missed the status I had enjoyed before. That, and a fear of financial insecurity, drove me to do well.

JAMES DYSON
Design assistant

Inventor of the bagless vacuum cleaner

People like to pigeonhole. If you want to be an inventor or an engineer, there’s little chance you will be met with wholehearted support.

I once went to see the school careers adviser. He declared I should be an estate agent. With all the keenness of youth, I went to talk to one. After about five minutes, he told me to follow my interest in art and become a painter.

It was the summer job I had at 20 when at the Royal College of Art that shaped my future. It turned into an obsession. The inventor Jeremy Fry, who became my mentor, asked if I wanted to help him work on the Roundhouse in north London. Once a great old locomotive turning shed, it was soon to be a theatre. I jumped at the idea and volunteered to design the auditorium – my first taste of large-scale engineering. I was hooked.

It had to be constructed in time for the opening night of Hamlet. Weekends and evenings were devoured designing and redesigning. The patience I built was to keep me going later on, through endless machine prototyping.

The experience taught me a great deal. Being entrusted with a project is a privilege. It has always been much more attractive to me than a nine-to-five. But it does not come cheap. You have to be prepared to slog your guts out in the face of red bank balances. Your only measure of success is how well something works.

It is remarkable that I was given a chance to work on the Roundhouse. It went up just in time for the first night.

MICHELLE MONE
Paper round

Founder of the Ultimo lingerie brand

My first job was a paper round at the age of 10. The following year, I did a deal with the newsagent that I would organise the paper round. So at the age of 11, I had, in effect, 17 teenagers working for me.

I then got a Saturday job in a fruit shop but was lured to a sweet shop at 14 by the offer of an extra 20 pence. Working there taught me a lot, principally the value of doing an honest day’s work, but also the importance of being on time and not letting people down. Serving people, calming down customers angered by buying rotten fruit, gave me confidence.

I worked because I want­­ed to help my mum (a care worker) and my dad (who mixed ink for printers). We lived in a one-bedroom tenement in the East End of Glasgow.

But I also liked having my own money, it gave me a taste of freedom and a sense of achievement being able to buy my own jeans. It seemed normal to work all the time even though none of my school friends did. They wanted to be pop stars while I dreamt of being in business. As a child, I used to love to play shop and be in charge of the money.

My Saturday jobs showed me how lazy some people could be. It would drive me insane if people put their coat on at 5.30pm on the dot regardless of whether they had finished the job or not. In my business today I don’t tolerate it.

My father was paralysed from the waist down at the age of 38. So I left school at 15 and went to work.

I shouldn’t have left then because I had no qualifications, but I had little choice. I needed to help the family.

It was tricky to find work at first, but I managed to get work as a catwalk model in fashion shows. At first I hated it but it made me astute and streetwise, and gave me a lot of confidence. It would be great to see more graduates with those qualities.

PETER HARGREAVES
Baker

Chief executive and co-founder of Hargreaves Lansdown, the independent financial adviser

My first memories of business were working in my father’s baker’s shop in Clitheroe in Lancashire. I suspect I was about seven years old when I first served in the shop. Lunchtimes involved a rota for who left their meal to serve in the shop. It’s the excuse I still give today for eating quickly. I also got involved with the baking side. One Christmas I vividly remember having a major part in the 120 dozen mince tarts that were needed. Even today, when pastry is needed at home, I am “volunteered” for the job.

In a small business you see all facets – you see the income and the expenditure. Many first attempts at business fail through not controlling costs.

While my father didn’t pay me for helping in the shop, throughout my school life he used to give me 10 shillings a week that I used to buy two 15-shilling national savings certificates every three weeks. It started my saving habit. I only had a small amount of pocket money but I always had money.

I also illicitly ran the school casino for a while.

I was not a good employee. I think I always wanted to work for myself but I thought my father’s business was just too hard work. The only reason he kept the business going was he loved baking bread, from which lesson I learned that you should do what you enjoy doing.

JOSEPH CORRE
Paper round

Co-founder of Agent Provocateur, the lingerie brand, and son of fashion designer Vivienne Westwood and the Sex Pistols’ ex-manager Malcolm McLaren

As a child I was always industrious. At eight I had a paper round and I did a lot of housework when my mum [fashion designer, Vivienne Westwood] went to work. I wasn’t paid for it, I just did it.

I wasn’t big on homework and revision and left school at 16 because I wanted to work and earn money. Later, I regretted not continuing my education and at 21 tried to get in to Trinity College, Dublin, to study etymology but it didn’t happen.

So at 16 I joined an advertising agency as a runner. I was living in a squat and was mainly interested in going out. But I always gave my best effort even when I was doing rubbish jobs.

My mum had a strong work ethic, she always believed you had to do the maximum not the minimum. Now as an employer if I can see people making an effort and can see they are investing in the company I give them a chance.

I earned extra money by doing market stalls at 17 and 18 at the Electric Ballroom in Camden, selling second-hand clothes.

When I was young I didn’t know what I wanted to do. I thought I might get to work in advertising but I realised reaching the top would take a long time.

At 18, my only plan was to travel through Europe, working in restaurants, in the hope I would find out what I wanted to do. I returned to London at 21 to help my mum set up her fashion label in the Kings Road. I worked really hard.

I’ve always been someone who just gets on with it and unblocks the toilet or carries the boxes.

I’ve never been afraid of doing rubbish jobs. I think everyone should feel that way – I like people who just get on with it.

Copyright The Financial Times Limited 2009.

BusinessWeek: The Anatomy of an Entrepreneur

The Anatomy of an Entrepreneur

Who Entrepreneurs Are and What Makes Them Tick

By Vivek Wadhwa

In 2004 small companies employed about half of the private-sector work force and generated about half of the nonfarm private gross domestic product in the U.S., according to the Small Business Administration.

Despite their enormous impact on the economy, little is known about entrepreneurs' backgrounds or motivations, beyond myths that cast them as privileged young workaholics chasing fame and fortune.

A study released by the Kauffman Foundation earlier this month, titled “The Anatomy of an Entrepreneur,” led by co-authors Vivek Wadhwa, Raj Aggarwal, Krisztina “Z” Holly, and former BusinessWeek tech editor Alex Salkever aims to discover who American entrepreneurs are and what makes them tick. To do so, the team surveyed 549 successful business founders from high-growth industries between August 2008 and March 2009. Flip through this slide show for Wadhwa's thoughts on the most compelling data.

===

Not College Dropouts

Entrepreneurs tend to be highly educated. We found that 95% had earned bachelor’s degrees and 47% held advanced degrees.

Better Educated Than Their Parents

Their parents weren't nearly as well-educated. Only half the company founders' fathers and only 34% of the founders' mothers held bachelor's or advanced degrees.

Ranked at the Top of Their Class in High School...

Seventy-five percent ranked their academic performance among the top 30% of the high school class, with a majority (about 52%) ranking their performance among the top 10%.

Not from Rich Families

Most of the company founders came from middle-class backgrounds (35% described themselves as upper-middle class and 40% as lower-middle class). Additionally, 22% said their parents were blue-collar workers engaged in some form of manual labor.

Less than 1% came from extremely rich or extremely poor backgrounds.

Not First-Born

The average company founder was not the eldest child.

Not the Only Child

Company founders tend to come from fairly large families, with an average of three siblings.

Married...

About 70% of company founders indicated they were married when they launched their first business. An additional 5.2% were divorced, separated, or widowed.

...With Children

Nearly 60% of company founders indicated they had at least one child when they launched their first business, and 43.5% had two or more children.

Entrepreneurship Didn't Always Run in the Family

Just over half of the respondents were not children of entrepreneurs.

Many Caught the Entrepreneurial Bug Later in Life

While half of the company founders had some interest in becoming an entrepreneur when they were in college, more than a third didn't even think about it, and just over 13% had little or no interest. Those from blue-collar backgrounds were more likely to have been extremely interested in starting a business.

Most Had Relevant Industry Experience

The majority of company founders (over 75%) had worked as employees at other companies for more than six years before launching their own companies. Nearly half launched their first companies with more than 10 years of work experience.

They Could've Landed Jobs But Didn't

Founders weighed in on a scale of 1 through 5, with 1 meaning not an important factor and 5 meaning an extremely important factor.

It wasn't that they couldn't get jobs. Over 80% of company founders said that inability to find traditional employment was not a factor in starting their own businesses. Only 4.5% said it was an important factor.

So why did they start companies? Just under 75% said their desire to build wealth was important; 64% said they have always wanted to own their own companies; 66% liked the appeal of a startup culture; and 60% said that working for others did not appeal to them.

Once an Entrepreneur, Always an Entrepreneur

A majority (over 58%) started more than one company. Eight percent of the company founders had started more than five companies.

Source: http://images.businessweek.com/ss/09/07/0724_sb_anatomy_of_entrepreneur/index.htm?link_position=link6

NY Times: Mom-and-Pop Operators Turn to Social Media

July 23, 2009

Mom-and-Pop Operators Turn to Social Media

By CLAIRE CAIN MILLER

SAN FRANCISCO — Three weeks after Curtis Kimball opened his crème brûlée cart in San Francisco, he noticed a stranger among the friends in line for his desserts. How had the man discovered the cart? He had read about it on Twitter.

For Mr. Kimball, who conceded that he “hadn’t really understood the purpose of Twitter,” the beauty of digital word-of-mouth marketing was immediately clear. He signed up for an account and has more than 5,400 followers who wait for him to post the current location of his itinerant cart and list the flavors of the day, like lavender and orange creamsicle.

“I would love to say that I just had a really good idea and strategy, but Twitter has been pretty essential to my success,” he said. He has quit his day job as a carpenter to keep up with the demand.

Much has been made of how big companies like Dell, Starbucks and Comcast use Twitter to promote their products and answer customers’ questions. But today, small businesses outnumber the big ones on the free microblogging service, and in many ways, Twitter is an even more useful tool for them.

For many mom-and-pop shops with no ad budget, Twitter has become their sole means of marketing. It is far easier to set up and update a Twitter account than to maintain a Web page. And because small-business owners tend to work at the cash register, not in a cubicle in the marketing department, Twitter’s intimacy suits them well.

“We think of these social media tools as being in the realm of the sophisticated, multiplatform marketers like Coca-Cola and McDonald’s, but a lot of these supersmall businesses are gravitating toward them because they are accessible, free and very simple,” said Greg Sterling, an analyst who studies the Internet’s influence on shopping and local businesses.

Small businesses typically get more than half of their customers through word of mouth, he said, and Twitter is the digital manifestation of that. Twitter users broadcast messages of up to 140 characters in length, and the culture of the service encourages people to spread news to friends in their own network.

Umi, a sushi restaurant in San Francisco, sometimes gets five new customers a night who learned about it on Twitter, said Shamus Booth, a co-owner.

He twitters about the fresh fish of the night — “The O-Toro (bluefin tuna belly) tonight is some of the most rich and buttery tuna I’ve had,” he recently wrote — and offers free seaweed salads to people who mention Twitter.

Twitter is not just for businesses that want to lure customers with mouth-watering descriptions of food. For Cynthia Sutton-Stolle, the co-owner of Silver Barn Antiques in tiny Columbus, Tex., Twitter has been a way to find both suppliers and customers nationwide.

Since she joined Twitter in February, she has connected with people making lamps and candles that she subsequently ordered for her shop and has sold a few thousand dollars of merchandise to people outside Columbus, including to a woman in New Jersey shopping for graduation gifts.

“We don’t even have our Web site done, and we weren’t even trying to start an e-commerce business,” Ms. Sutton-Stolle said. “Twitter has been a real valuable tool because it’s made us national instead of a little-bitty store in a little-bitty town.”

Scott Seaman of Blowing Rock, N.C., also uses Twitter to expand his customer base beyond his town of about 1,500 residents. Mr. Seaman is a partner at Christopher’s Wine and Cheese shop and owns a bed and breakfast in town. He sets up searches on TweetDeck, a Web application that helps people manage their Twitter messages, to start conversations with people talking about his town or the mountain nearby. One person he met on Twitter booked a room at his inn, and a woman in Dallas ordered sake from his shop.

The extra traffic has come despite his rarely pitching his own businesses on Twitter. “To me, that’s a turn-off,” he said. Instead of marketing to customers, small-business owners should use the same persona they have offline, he advised. “Be the small shopkeeper down the street that everyone knows by name.”

Chris Mann, the owner of Woodhouse Day Spa in Cincinnati, twitters about discounts for massages and manicures every Tuesday. Twitter beats e-mail promotions because he can send tweets from his phone in a meeting and “every single business sends out an e-mail,” he said.

Even if a shop’s customers are not on Twitter, the service can be useful for entrepreneurs, said Becky McCray, who runs a liquor store and cattle ranch in Oklahoma and publishes a blog called Small Biz Survival.

In towns like hers, with only 5,000 people, small-business owners can feel isolated, she said. But on Twitter, she has learned business tax tips from an accountant, marketing tips from a consultant in Tennessee and start-up tips from the founder of several tech companies.

Anamitra Banerji, who manages commercial products at Twitter, said that when he joined the company from Yahoo in March, “I thought this was a place where large businesses were. What I’m finding more and more, to my surprise every single day, is business of all kinds.”

Twitter, which does not yet make money, is now concentrating on teaching businesses how they can join and use it, Mr. Banerji said, and the company plans to publish case studies. He is also developing products that Twitter can sell to businesses of all sizes this year, including features to verify businesses’ accounts and analyze traffic to their Twitter profiles.

According to 

FT: Dining al fresco

Dining al fresco

By Nicholas Lander

Published: July 24 2009 16:59 | Last updated: July 24 2009 16:59

Open-air: Jean-François Delaunay, general manager at Le Pont de la Tour, near Tower Bridge in London, on the restaurant’s riverside terrace

Charlotte Street, just north of Oxford Street, is a foodie destination that encapsulates cosmopolitan London. Along its length there are cafés and restaurants offering pizza, steak frites, Mexican food, and Malaysian seafood alongside Thai noodles, Asian dim sum and Spanish tapas, as well as the usual wine bars and pubs.

In a recent spell of sweltering heat, many people were eating and drinking outside. As I wandered past, I saw some diners enjoying formal terraces with full length windows open to a cool, air-conditioned dining room behind. Others, at cheaper establishments, had ad hoc arrangements with somewhat rickety tables. But every available outdoor seat was taken and everyone appeared to be having a good time.

Food and wine undoubtedly taste better in the fresh air but the most important ingredient is the outdoors. Just being on a picnic; or on a mountain terrace looking down on the ski slopes; or by the water’s edge – such as the unique pleasure involved in eating on a terrace in Venice, for example – will often provide memories that endure longer than the flavours we experience at these moments.

In recent years, more city-centre restaurants in Britain have realised that customers love outdoor seating, which provides us with the opportunity to live like a Mediterranean, however temporarily,and also allows us all to enjoy a little more space than our increasingly crowded working and living conditions normally permit.

For the restaurateur, taking on premises with a terrace is not just a commercial decision but one that will require the highest levels of diplomacy any receptionist can manage. When the sun is out, most people want to enjoy it and somebody will undoubtedly be disappointed.

. . .

The most important calculation is to be sure that terraces can work all year – not just for three or four sunny summer months. Ted Schama, director of leisure consultants Shelley Sandzer, reports that an increasing number of the new restaurant developments in central London are incorporating terraces. And financially, an outdoor space is not too much of a gamble. Schama explains that the rent for a terrace is roughly a quarter of what the main restaurant space will fetch.

Although at the mercy of the weather, a terrace with outdoor seating brings the restaurant indirect benefits, according to Schama. The first is the sense of the relaxed southern European lifestyle that it conveys. The second is the impact on sales – which can be far higher than the restaurant has budgeted for. This often happens when diners find the right style of relaxed, informal food in a busy location – St Christopher’s Place in central London, for example, or along bustling Bankside, along the south of the Thames. Terraces allow customers to unwind; they are likely to spend more time at their table and, therefore, more money.

But the biggest impact of any outdoor seating is the free advertising it generates. The sight of people enjoying a glass of wine and some food in the sun creates a compelling desire in passers-by to stop and do exactly the same thing.

The challenge, of course, is that no terrace is ever large enough to accommodate demand when the sun is shining. A golden rule of restaurant management is that no customer will ever be guaranteed a table on the terrace when they phone to book.

Instead, as Jean-François Delaunay, the experienced general manager of Le Pont de la Tour by London’s Tower Bridge explained, “Our receptionists are trained to respond to whoever asks for a table on the terrace that their request has been noted and we will do our best to accommodate them. More than that we cannot promise.”

This reticence is based on good commercial sense – any restaurant needs to fill more than its terrace to remain profitable – but also on long experience. Blue skies can cloud over very quickly and along the river Thames, according to Delaunay, the wind can change direction suddenly, forcing his staff to strip the outdoor tables and hastily reseat all customers inside as thunder and lightning pummels the once-crowded terrace.

Such sights, Delaunay confessed, are one of the most frustrating aspects of his role as a general manager in London, but they happen everywhere. A lunch at El Bulli in north-east Spain one summer’s day was memorable for more than the legendary food – we began on the terrace, continued under an awning as the rain began, and finished inside as the storm brought rain so heavy that it seeped in, around and under the window frames.

As the British climate seems to be getting warmer, more uninterrupted sunshine will bring subtle changes in our eating patterns. At lunch, we will eat less and drink more beer and less wine; the late afternoon and early evening period will be even more popular as customers linger to drink on terraces and stand outside pubs rather than head to the cinema, theatre or home. Some recent hot, humid evenings have led to greater demand for restaurant bookings at the normally less popular 9pm and 9.30pm slots rather than the customary British 8pm.

And, once the final al fresco customer has been served on busy, balmy nights on Charlotte Street or elsewhere, there is invariably a welcome cool bottle of beer waiting for every – by now somewhat sticky – member of the hard-working kitchen brigade.

Favourite terraces

Berowra Waters Inn, Australia
www.berowrawatersinn.com

Antica Locanda Mincio, Verona, Italy
www.anticalocandamincio.it

Cip’s Club, Cipriani Hotel, Venice, Italy
www.hotelcipriani.com

Café Marly, Paris

..........................

Al fresco with FT writers

Rome

Though there’s no such thing here as dining “al fresco”, writes Guy Dinmore, the FT’s correspondent in Rome, (actually, it’s Italian slang for being in jail), you can eat all’aperto and hope for Rome’s refreshing ponentino, or little western breeze.

Rome is getting expensive and too many outdoor establishments rest on their laurels. Still, here is a suggested tour of the historic centre.

Grand Hotel de la Minerve

First, an aperitivo at the rooftop bar of the Grand Hotel de la Minerve. Pricey drinks and crummy snacks are compensated by a view of seagulls circling the tiered dome of the Pantheon, and Bernini’s obelisk-bearing elephant below.

Then to Baffetto for probably the best value pizza in town – Roman- style, thin and singed at the edges, served on paper tablecloths by waiters who have done this for decades. On a corner of Via del Governo Vecchio. No bookings, so be ready to queue and share a table.

Alternatively, when in Rome do as Michelle Obama did. The no-frills Maccheroni trattoria on Piazza delle Coppelle offers satisfying cacio e pepe (cheese and pepper pasta) and gricia (bacon and pecorino cheese pasta), with a jug of house wine.

Next pop into Piazza Navona for the densest darkest crunchiest tartufo, chocolate chip ice-cream, at Tre Scalini, near Bernini’s newly restored fountain of four rivers.

Finally, follow your nose to café Sant’Eustachio, in the square of the same name by the Senate, for Rome’s most glorious coffee, roasted in-house, served sweet unless requested otherwise. Open until the early hours.
Additional research by Giulia Segreti

Paris

Paris is a city made for walking, and when the weather is right, it is also a wonderful place to eat outdoors, writes Mike Steinberger.

Yves Camdeborde’s superb Le Comptoir du Relais, the most acclaimed of Paris’s New Wave bistros, has excellent sidewalk seating and is ideally situated on the Carrefour de l’Odéon, just off the boulevard Saint-Germain in the sixth arrondissement. Also on the Left Bank, in the Seventh, is Les Fables de la Fontaine, one of a quartet of restaurants on the rue Saint-Dominique started by Christian Constant.

Hotel le Bristol

The restaurant in the Hotel Le Bristol, which under chef Eric Frechon (a Constant protégé) garnered a third Michelin star this year, has tables in the spectacular garden at the rear of the hotel, a setting so pleasing that it might even dull the sting of the equally spectacular bill – just a bit, anyway.
Mike Steinberger’s ‘Au Revoir to All That’ has just been published

Shanghai

A decade or two ago, it would have been unthinkable to sample innovative tapas dishes on the elegant terrace of a quirky, stylishly renovated old mansion in the heart of Shanghai’s old French quarter. But just like any other Asian city, Shanghai has embraced al fresco dining, writes Gwen Robinson, an FT Asia Alphaville correspondent.

M on the Bund

El Willy, a contemporary Spanish fusion restaurant run by Catalan chef Willy Trullas Moreno, boasts a menu that encompasses eclectic brunches, gourmet paella dinners and creative tapas. In terms of Shanghai’s al fresco settings, however, M on the Bund still enjoys pride of place – a rooftop terrace overlooking the Bund, the Chinese metropolis’s historic waterfront.

Bangkok

In Bangkok, Lebua’s Sirocco restaurant claims to be the world’s highest al fresco restaurant. But other destinations for hip open-air dining include Mahanaga, the Long Table, Café Ice, a newish western- Asian fusion restaurant, and the artsy bistro Eat Me.

Tokyo

In Tokyo,diners still largely prefer indoor dining, though habits are changing. Popular outdoor eateries are often better known for their surroundings than for gourmet food; among them are restaurants in the Global Dining group. Other scenic spots include the French Kitchen at the Grand Hyatt and venues in Roppongi’s Midtown complex.

Copyright The Financial Times Limited 2009

AdvertisingAge: Is Customer Service a Media Channel? Ask Zappos

 

Is Customer Service a Media Channel? Ask Zappos

Brand Turned Cost Center Into Unassailable Asset Even Amazon Looks Up to

By Pete Blackshaw

Published: July 23, 2009

Pete Blackshaw

Is customer service a media channel? It's a great time to ask that question, as it comes right smack in the wake of Amazon purchasing Zappos for nearly a billion dollars. That's a big number for an online shoe company.

We can certainly follow standard protocol and analyze this by looking at the fundamentals and "usual suspect" metrics, but I suggest we take a detour and ask a few less obvious -- yet infinitely revealing -- questions. For instance, why did Amazon CEO Jeff Bezos, more than a year and a half ago, attentively and noticeably take notes near the front row at South by Southwest while Zappos Tony Hsieh talked about Zappos' culture, values and service? What could the lanky shoe guy possibly know that the former Time magazine "Man of the Year" doesn't?

Here's another one: How on earth did the CEO of a shoe company enter the "million follower" club on Twitter? I mean, isn't that club reserved for the likes of Lance Armstrong, Ashton Kutcher, Shaquille O'Neill and other mega-celebrities? What on earth could a shoe company CEO say that would keep us so engaged, eager to tell others and at times feeling a bit "religious"?

And another: How on earth can a company drive serious revenue that lets its employees do all these weird, off-protocol things like occasionally delivering pizza, not shoes, when customers call the 800 number? I mean, where's the discipline and focus, folks? Sounds like touchy-feely dot-com hype revisited, no?

Yes, I'm sure there is a mountain of analytical bean counters behind the magic numbers in this deal, but we all know what's really going on. Heck, we've been talking about it incessantly for well over two years.

Zappos is a game changer, and it found value -- and ferocious word-of-mouth and brand advocacy -- in a place most of us leave for dead and certainly don't consider even close to being a media channel: customer service. They took this "cost center" input and turned it into an unassailable asset, fortified by the founder-CEO's sometimes "cult-like" (arguably irrational, by the typical marketing book) obsession with serving the consumer at all costs. It wasn't flaky. He approached this with focus, discipline, real incentives and an obsession over a "different" set of numbers.

Zappos did this at a critical juncture for all of us. We know word-of-mouth matters. We suspect "advocacy" might be the metric that truly moves the needle. Even separate from the Amazon deal, Zappos probably did more to shape our collective mind-set around the importance of "paid" vs. "earned" media, and it titled us much toward the later.

But lest anyone mistakenly conclude this is all about Twitter -- or the "mother of all social media case studies" -- let's not forget they first focused on the boring stuff. Whenever I consult brands' social media, or what I now prefer to refer to as CRM 2.0, I insist they do two things: Call their 800 number and then try to send e-mail feedback to themselves. Most fail -- miserably. Zappos takes precisely the opposite path. It plasters the 800 number all over, even in Spanish. It recklessly (I say brilliantly) throws so-called "operational costs" to the wind and writes it off as a marketing investment. It's not just that it is "powered by service," as the tagline suggests; service is its core DNA.

If you look hard enough, you can count more than 20 service offers or invitations for feedback on the Zappos home page. Just imagine, the world's largest online retailer -- also pretty good at service themselves -- just dropped nearly a billion bucks on a company that promotes the very things we religiously hide from the consumer.

Being a "Nielsen" guy, I love numbers, data charts and trends. But sometimes you can just "feel a movement." One of my aha moments with Zappos came the night before I moderated a panel for Ad Age's 2008 Digital Conference in which the Zappos CEO was participating. My wife and I were aggressively surfing the site, looking for soft spots or vulnerabilities I could translate into an uncomfortable question to destabilize my big-fish panelist. We decided to have an online "chat" with a Zappos service representative, and started throwing her every obnoxious question we could think of.

It was like we invited her to a party. She relished in the questions. Her enthusiasm was off the charts. When we asked her what she thought of the Zappos CEO, she gushed with authentic passion because he and the rest of the management team really made employees feel special working there.

Darn if I haven't told that story a thousand times, and even included it half the industry speeches I deliver. Zappos figured out early on that customer service and employee advocacy is way better and more efficient than paid media. But unlike the rest of us, it didn't just pontificate that philosophy. It put it to work.

I think we should all buy those shoes.

ABOUT THE AUTHOR

Pete Blackshaw is exec VP of Nielsen Online Digital Strategic Services and author of "Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000" (DoubleDay). He is also chair of the National Council of Better Business Bureaus. His biweekly column looks at the relationship between marketing and customer service in the age of consumer control.

FT: Forget the customer at your peril

Forget the customer at your peril

By Luke Johnson

Published: July 14 2009 23:34 | Last updated: July 14 2009 23:34

In business, everything starts with the customer. Without customers, there are no sales, and with no sales, a business is bankrupt. Adam Smith knew this. “Consumption is the sole end and purpose of production,” he wrote.

Many companies forget this, however, and eventually pay the price.

Last week I sat, increasingly miserable, in an establishment I own, as a catalogue of incompetence saw a series of customers treated poorly. I could bear it no longer and intervened; now I shall watch like a hawk to see that our employees remember that without customers, there is nothing. On this occasion, the staff were too busy dealing with “internal” matters to attend to the very people who justify the whole undertaking.

On the same day, I was treated to a classic piece of poor service and inflexibility by British Airways, the struggling airline. It made me wonder if they will survive this downturn.

I fear that BA has become an institution run not for the benefit of its customers – who provide its revenue – but for its staff and pensioners. Its shareholders, meanwhile, have long been forgotten. It suffers from all the weaknesses of an ex-monopoly now facing ferocious competition and a terrible economy. Recent statistics show that BA cabin crew earn twice what rival airlines pay – and none of its competitors has BA’s huge pension burden either.

BA has a high-cost model, and has come to depend on juicy margin passengers in first and business class. That income stream has been eviscerated – and is not returning soon. BA still charges significantly more than no-frills operators, and justifies this by calling itself a “full-service” airline.

Even vast companies with seemingly impregnable market positions can fail if they lose sight of why they are in business

My recent experience is that its service levels are no better than low-cost operators. In this climate, everyone is focused on value – and customers will desert an expensive offering for a cheaper one if the quality is indistinguishable. Management at BA are understandably trying to cut costs, since the business lost more than £400m last year and may lose more this year. The union’s answer to this massive challenge smacks of industrial suicide: they are threatening to go on strike.

Another organisation captured by workers and facing crisis is the Royal Mail. It is a monopoly now facing competition on many fronts. Technology is destroying the traditional letter as a means of communication at alarming speed. Letter volumes are falling by at least 10 per cent annually, and as everyone gets broadband connections, the need for traditional postal provision may well disappear altogether. Our local postmen appear to do a conscientious job but the organisation urgently needs to modernise and scrap archaic working practices.

Efficient newcomers and online alternatives mean the Royal Mail has a huge battle on its hands. Its staff are paid more than the private sector, their productivity is low and the organisation has a colossal pension deficit.

The Royal Mail has the luxury of being government owned, and its union contributes to the Labour party’s coffers, which give it some current protection. But the grim reality of the market will intervene sooner or later. Again, the union response to reform has been to strike. Each time this happens, customers switch, never to return – steadily bleeding the mail to death.

Even vast companies with seemingly impregnable market positions can fail if they lose sight of why they are in business. General Motors had the supreme arrogance of a company with 40 per cent of all US car sales. But it pandered to its employees and the unions, failed to understand its customers and eventually needed a $50bn (€36bn, £31bn) government rescue. The demoralised and shrunken entity, now emerging from bankruptcy, may soon have just 10 per cent of the US market.

A contrast is the John Lewis Partnership, the British department store and grocery chain. Here the staff really do own the business, and behave like enlightened capitalists, rather than bloody-minded union members. It offers world-class service and a lesson in how important it is to keep the customer happy.

lukej@riskcapitalpartners.co.uk
The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

Copyright The Financial Times Limited 2009

BusinessWeek: When Sister Is Your Business Partner

Leadership June 30, 2009, 9:40AM EST text size: TT

When Sister Is Your Business Partner

Sibling Cakegirls Brenda and Mary Maher have built a booming family confectionary business in Chicago with hard, thoughtful work

By Stacy Perman

As sisters growing up in Rochester, Mich., Brenda and Mary Maher shared a bedroom and a Hasbro (HAS) Easy-Bake oven. As college students, they shared a passion for baking elaborately decorated cakes. And since 2000, the Maher sisters, now 37 and 39 respectively, have shared a thriving Chicago-based business, Cakegirls, which sells some $300,000 worth of specialty cakes a year. Though they have perfected their ability to craft scale replicas of such cultural artifacts as Wrigley Field and the Sony (SNE) PlayStation—sold to celebrity clients, including Bono and Jim Carrey—and they appear on WE tv's Amazing Wedding Cakes and the Food Network's Last Cake Standing, their biggest business accomplishment to date is their nine-year-old partnership.

While every partnership is fraught with risk, those between siblings are even dicier because of the preexisting personal dynamic that almost always characterizes ties between close family members. Bill Alexander, a professor at the Wharton School who specializes in family businesses, explains that "lifelong relationships unconsciously get carried into these partnerships." At the same time, defining business roles and putting them into practice is tricky. And resolving disagreements—or trying to—can be tinged by decades-old family patterns. Wayne Rivers, president of Family Business Institute in Raleigh, N.C., an advisory firm for family-owned companies, says: "Siblings are more hesitant to sign documents. Siblings often go in with blind trust; you're my sister I trust you"—often thinking family ties will bind their business relationship.

According to the Family Firm Institute, a research group in Boston, only 30% of family-owned businesses make it to the second generation, 10% to the third generation, and 3% to the fourth. While Rivers notes that there are no reliable statistics on the number of business partnerships comprised of siblings, he says it is rising among the businesses he works with. "Ten years ago, 25% of family businesses were partnerships. I would say [the number] is substantially larger today."

After three years of toil, a break

Unlike their genre-busting cakes, the Mahers started off cautiously, holding down day jobs while they figured out their fledgling business concept. In 1998, Brenda moved to Chicago by herself and worked as an administrative assistant for a staffing company with the goal of gaining business skills and locating a viable market. "I don't like to be one-dimensional. It allowed me to get my feet wet in Chicago and learn a variety of skills," she says. By the time Mary came to Chicago (with a full set of professional baking and kitchen equipment) two years later—she had been working at an upscale Detroit-area bakery&—a sense of the business and the roles they would play had emerged. Brenda took the lead role in business and Mary focused on the creative side of cake baking and decorating. The Cakegirls got the word out themselves, telling friends and co-workers about their "night job" in the kitchen.

In the beginning, the sisters lived and worked in the same apartment. They gave prospective customers the impression they had a much bigger operation by using voice mail and posting their catalog online. They also opened a business bank account with $500 and deposited any money they earned from baking into it. Within three years, the Mahers had saved $15,000 from sales, having continued to survived on the income from their day jobs. "I think it is a mistake people make when they blend their expenses together," says Brenda. "We wanted to get a sense over time how much money we could save just on making the cakes out of the apartment." Word spread about their sculptural confections. When Chicago magazine ran a feature on them in 2003, orders flooded in, prompting Brenda to buy a minivan for deliveries. The Mahers felt they were at a crucial point: The business needed a full-time commitment to take advantage of the momentum and sustain itself.

Again, Brenda moved first, cutting back her hours as an administrative assistant. "It was scary. We couldn't get a loan. But I knew if I had more time to devote to the business, we could grow it," she says. The sisters worked out an arrangement in which Brenda worked during the days doing the administrative details and baking. When Mary arrived in the evening, after putting in time as a nanny and as a bookseller at Barnes & Noble (BKS), she did the decorating.

full-time, professional commitments

Although Brenda enjoyed decorating, she was pragmatic. "Mary is 100 times a better decorator than I am and I knew that if I didn't answer the phones and create a structure for the business, it wasn't going to happen."

Their personalities influenced the evolution of the business, too. "I'm more of the mind, if it flops it flops, and Mary is more get-your-ducks-in-a-row," says Brenda. She pushed for a professional space instead of their apartment. Mary waffled at first but the pair eventually signed a six-month lease on a former bakery close to Wrigley Field. It cost an initial $5,000 for the security deposit—a third of what they had saved in three years. Convinced that the business needed her to devote more time to it to succeed, Mary also quit her day jobs. The sisters say the gamble gave Mary the opportunity to experiment with cakes and decorating techniques that would bring the business acclaim.

Until the sisters signed the lease, they had nothing in writing that signaled a formal business partnership. But shortly after signing the lease, they incorporated the business to protect themselves from liability. Like many sibling partnerships, the Mahers consider themselves equal partners and earn identical salaries. Staying true to character, they maintained a sense of humor when assigning their titles. When elder sister Mary filled out the paperwork, she listed herself as president and made Brenda secretary. "Just to get under her skin," jokes Mary.

"The baby of the family" says "no"

The pair say their biggest arguments and struggles often reflect the pecking order established in their childhoods. "I tend to be more black-and-white," says Brenda, "and she is more grey." Brenda says that Mary is very literal and spends a huge amount of time making sure each cake is done to perfection. Says Brenda: "What we fight about most is probably about her saying I charge too much and me saying she takes too long. I say she's adding too many details and she says that's a lot of money."

For instance, not long ago, Brenda decided to stop taking on projects she deemed unprofitable. "We were saying yes to everything and Brenda stopped that," says Mary. "She said: 'Now we have to learn to say no in order to improve the business.' I think that has to do with her being the baby of the family. She wants to prove herself."

Their relationship as sisters does lead to a bit of bickering. "To some degree when we fight, we resort back to who we are as siblings, even though we are talking about business-related things," says Mary. At the same time, they watch out for each other. "We're more like two squirrels," says Brenda. "Neither of us wants to leave early and leave the other one there. We look out for each other. If I see she's getting burnt-out, I say take a day off, and she does the same."

Family business experts Alexander and Rivers agree that one of the biggest challenges in making a sibling business partnership last involves delineating the business relationship and family relationship—both of which tend to overlap. The Mahers say one lesson from their early years—when they both lived and worked together—is the need for space. The pair say they rarely spend time together outside of work these days. (Mary is married, with a young son; Brenda is single).

In the end, the Mahers say that what makes their partnership risky also instills a sense of commitment that's lacking among most business partners. "There is a big difference about working with siblings," says Mary. "I've watched friends who ran small businesses build up a lot of animosity. [Then] they have some disagreement and they sue the other. That is shocking to me. We have a silent agreement. If I don't want to be part of this business, I can't screw over my sister in the process no matter how ugly it gets."

Perman is a staff writer for BusinessWeek in New York.

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

NY Times: How to Start a Company (and Kiss Like Angelina)

July 12, 2009

How to Start a Company (and Kiss Like Angelina)

By JULIE CRESWELL

IN their star turns in James Bond movies, Ursula Andress and Halle Berry perfected the art of emerging from an ocean swim and walking onto the beach in a dripping-wet bikini.

For everyone else? Not so easy. But there are some tricks for aspiring Bond girls, and they involve, among other things, waterproof mascara, Vaseline and double-sided tape. There are some finer points, too, to pull off such a feat, and words can’t quite convey their subtleties.

Sometimes — and this is a difficult sentence for a newspaper to print — it’s easier to learn from a video.

That notion led a handful of Google and YouTube veterans to start Howcast.com, and jump into the bustling and fast-growing crowd of Web sites offering how-to content.

Given the competition, from sites like Howdini and even YouTube, Howcast Media is betting that its particular blend of information and entertainment, presented in short and snappy video, will draw plenty of traffic and, most important, deliver a profit.

Certainly the demand is there. People like to watch videos, and, in a bad economy, the ranks of do-it-yourselfers and would-be MacGyvers are swelling.

Already, Howcast has 100,000 videos in its library, some that it has produced itself and many more from others like Playboy, Popular Science, Home Depot and the Ford modeling agency that share in the ad revenue.

The site offers instruction on a range of topics, from everyday issues — fixing a leaky faucet, creating a living will — to the more obscure, like how to survive a bear attack or how to have sex in a car. (Nothing on Howcast is particularly graphic. Plenty of other sites, of course, already offer that sort of stuff.)

Given the ease of posting on sites like YouTube, where 20 hours of video are uploaded each minute, it takes more than a bunch of short clips to succeed. Part of the trick to winning on the Web is having a distinct personality.

Some industry executives give Howcast credit for finding a way to stand out.

“They understand that video is an incredible medium to share and instruct,” says David Eun, a Google executive who oversees strategic partnerships. “But they also realize that they can use video to provide instruction in an environment that is entertaining, not dry.”

One of the biggest challenges for a site like Howcast, though, is the same one that has vexed old-school media giants and survivors of the dot-com boom: How can content creators turn a profit on the Web?

Howcast’s solution is to partner with advertisers and create instructional videos for their specific products or services.

Blurring the lines between editorial and advertising is a tricky endeavor, of course. Companies that try to be too stealthy or clever risk seeing their brand roasted on Facebook, Twitter and beyond.

“Users are sensitive to brands trying to muscle into what appears to be an organic social media environment,” says Nick Thomas, an analyst at Forrester Research. “Yes, I want to learn how to cook something, but do I necessarily want to be taught by someone who makes the ingredients?”

Howcast’s team of young executives argue that they can tap-dance along that fine line by making sure that any branding effort is in a supporting role, rather than a starring one, in its instructional videos.

They are even forging relationships with the State Department as it looks for ways to use social networks and other media to communicate directly with people around the world. Among the videos they’ve produced for it are “How to Protest Without Violence” and “How to Launch a Human Rights Blog.”

Howcast executives are also quickly signing deals with the likes of Google, Facebook and Hulu to spread their videos across the Internet.

“Being a media company today means you can’t exist inside a walled garden, just driving traffic to your own site,” says Jason Liebman, 33, Howcast’s chief executive. “You have to produce the content, distribute it all over the Web, develop the technology — all of which is hard to do. But you need to do everything in order to be successful today.”

SITTING in a stifling office loft in the SoHo neighborhood of Manhattan, with a couple of air-conditioners chugging away in vain, Jeffrey Kaufman runs through the topics that are particularly popular on search engines these days. The list includes werewolves. And manboobs.

Mr. Kaufman is the head of programming at Howcast, and is supposed to have his fingertips on the nation’s pulse through proprietary data-mining tools and information gathered from search engines.

Mr. Kaufman chalks up the werewolf craze to the coming movie “New Moon,” the second installment of the popular “Twilight” vampire series, based on the books by Stephenie Meyer.

Why manboobs? Everyone in the small room shrugs.

Then they have to figure out a how-to video spin on the topics (How to make a werewolf costume? How to get rid of manboobs?). The final consideration is whether the subject will attract advertisers or, better yet, a corporation would pay to have its product or service appear in the video.

The how-to category is big and growing, but extremely fragmented. And while Howcast, whose Web site is just 17 months old, is watching its traffic soar, it lags far behind eHow and About.com (owned by The New York Times Company), according to Hitwise, a research firm.

Howcast says its videos were played more than 20 million times last month across all of its distribution network, including YouTube and Apple’s iPhone. What may give Howcast a leg up on its competitors is the fact that the company is creating a library of high-quality content that could command higher ad rates, says Allen Weiner, an analyst at Gartner, the tech research firm.

To help viewers navigate through the 100,000 videos on its site, Howcast divides them into 25 broad categories — such as technology, travel and food and drink — and then slices and dices those into smaller segments.

Viewers can rate the videos (a video teaching how to pick a lock rates disturbingly high). Videos on sex and relationships are among the most watched at the Howcast site. No. 1 is “How to Have Sex in a Car,” followed by “How to Use Twitter” and “How to Kiss Like Angelina Jolie.” (Ms. Jolie is not in the video; it features two women in their underwear kissing on a bed.)

Mr. Liebman, the executive overseeing this start-up, seems somewhat embarrassed about this playlist. He prefers to talk about the Howcast videos that are the most popular across all the sites that distribute the company’s content, including “How to Quit Smoking” and “How to Do the Moonwalk.”

Mr. Liebman was bitten by the start-up bug when he was 16 and started a newspaper — “it was profitable,” he says — for New York prep school students. In a 1992 article in The Daily News, he was described as the “picture-perfect model of the Privileged Prepster.”

After graduating from Duke with a degree in political science, Mr. Liebman migrated to Wall Street, where he spent some time as an investment banker in leveraged finance. Watching the dot-com run-up on the West Coast, however, he wanted to join the party. He packed his bags and took up residence on his twin sister’s couch in Los Angeles.

A couple of months later, he landed at a software start-up called Applied Semantics. There, he worked in sales and capital-raising while also overseeing a team of engineers that developed AdSense, software that matched advertisements to related content or text on a Web page. AdSense had been on the market for only a few months when, in 2003, Google acquired the company in a deal valued at $102.4 million. Mr. Liebman returned to New York to work from Google’s offices there.

Much of his time at Google, particularly after the 2006 acquisition of YouTube, was spent persuading sometimes stubborn media companies to post clips of their shows or movies on its site.

Other members of the Google video team included Daniel Blackman, a sales and business development executive with a broad background in digital media, and Sanjay Raman, an M.I.T. graduate who started his first software company in college and later was an analyst at Morgan Stanley.

Over time, the group noticed a surge in search traffic for instructional videos at Google and YouTube.

“We were seeing user-generated content getting millions and millions of hits,” Mr. Blackman says, “and it would be nothing more than a guy in his dorm room showing you how to tie a tie with a simple Webcam.”

The growing interest in how-to videos parallels what happened in the early days of video, says Mr. Weiner, the Gartner analyst.

“Things like the Jane Fonda video that showed people how to exercise was a big blockbuster,” he notes.

Other sites were building business models around simple instructional homemade videos, but Mr. Blackman and his team saw flaws in their strategy.

The quality of footage and content was uneven. The pedigree of the individual “experts” was unclear. And advertisers sometimes balk at homemade videos, citing concerns about who owns the rights to the content, Mr. Blackman says.

The three friends left the comfortable confines of Google in May 2007 and set off on their own.

Most large venture capital firms are loath to back start-ups without seeing some content or a mockup of the site. So Howcast’s founders bankrolled the company’s first batch of videos, producing them on the cheap.

For that, Mr. Liebman invited his twin sister, Darlene Liebman, to come on board as another co-founder. Ms. Liebman had spent a decade in television and film, working on shows like “Nash Bridges,” “Queer Eye for the Straight Guy” and video clips for Nickelodeon.

Ms. Liebman’s marching orders were to create 400 how-to videos in two months.

“That’s like boiling the ocean; I thought he was absolutely insane,” Ms. Liebman said. They set up a small studio in the back of their office and called on family, friends and even employees to appear in some of the early videos.

Another one of Mr. Liebman’s sisters, a dermatologist, was enlisted for a video on how to spot skin cancer. The company also sought out local experts, bringing in the head chef from the restaurant Sushi Samba for a video on how to make sushi.

To build its library even faster, Howcast started offering aspiring filmmakers $50 to shoot two- to three-minute videos. The practice continues: Besides getting a chance to show off their skills to a large audience, they also get a percentage of the ad revenue if their video is a hit.

The videos produced by Howcast follow a set format, using quirky music, graphics and voiceovers, which make the videos easier to translate into different languages. Howcast even built its own media player with slow-motion and zoom-in features.

With the company’s beta site running, Mr. Liebman started hunting for venture capital last fall. Thanks in part to the résumés of the Howcast founders, they quickly raised $10 million from the Tudor Investment Corporation and tech insiders like Tim Armstrong, who was recently named chief executive of AOL, and Jason Hirschhorn, recently named chief product officer at MySpace.

“What we liked was the fact that there’s endless content,” notes Kevin Law, a former music executive who is now an investment consultant to Tudor and serves on Howcast’s board. “There’s a how-to that can go along with any service, any product.”

Building up a library of content is relatively easy, says Rupert Ashe, the chief financial officer of Videojug in Britain, which went live in 2006 and now has 100,000 how-to videos.

“The thing that is difficult to get and takes many, many years to build up is a following and traffic to the site and a place in the search-engine constellation,” Mr. Ashe says.

The space hasn’t yet seen a “mega-breakout site,” says Mr. Thomas of Forrester Research. But over time, he says, one or two sites will inevitably emerge as dominant players, and many others will fade away.

IN the middle of last year, the food company Nestlé noticed a peculiar spike in complaints from consumers in a Middle Eastern country about the taste of one of its products, the instant coffee Nescafé Gold.

After some sleuthing, the company discovered that people in that country — Nescafé wouldn’t say which one — didn’t understand how to make its instant coffee. They were making it like traditional ground coffee, said Rakan Brahedni, a new-media relationship specialist for Nestlé in Dubai.

Mr. Brahedni, who says he had “fallen in love” with Howcast’s site, particularly its cooking videos, was already in discussions with the start-up to add videos to Nestlé’s Web site.

So Howcast quickly produced a video showing how to make Nescafé Gold. The graphics, subtitles and voiceover were done in both English and Arabic.

“This was very much out-of-the-box for us, and now we’re seeing a lot of excitement from other brands” inside the company, Mr. Brahedni says. The video will soon appear on a Nescafé Web site, and Howcast will distribute it to some of its partners.

In this light, Howcast may look like more of an advertising agency than a media company. Unlike pricey ad agencies, however, that can charge hundreds of thousands of dollars for a 30-second advertising spot, Howcast produces videos for corporate customers at a fraction of that cost. Its executives say this is its entree into big corporate ad budgets.

And they argue that they are still sticking with their primary focus: to create instructional content.

When JetBlue Airways planned its inaugural flight from Kennedy Airport in New York to Los Angeles International earlier this year, it turned to Howcast to create videos for the occasion.

The result was a series of clips, including “How to Stay Fabulous When You Fly Coast to Coast,” featuring Delphine, a leggy Ford model with her own YouTube following. The video can be found on numerous sites, including Yahoo, AOL, MySpace and Metacafe.

JetBlue executives say they are thrilled with the response from the spots and plan to work with Howcast again. “What Howcast offers is something that is very cost-effective and very targeted,” said Morgan Johnston, a JetBlue spokesman.

Howcast executives see opportunities beyond corporate America. They’re hoping to get more work from the federal government.

So far, they’ve worked mostly with the State Department in its “Public Diplomacy 2.0” initiative to use new media to communicate, says James K. Glassman, a former under secretary of state for public diplomacy.

“What we saw in Iran is that the private sector played a very important role in disseminating information there,” Mr. Glassman says. “Companies like Twitter and Facebook facilitated a lot of the activity in Iran.”

In April, Mr. Liebman traveled to Iraq with a delegation from several tech companies on a trip arranged by the State Department to offer guidance on how new technologies could be used in the country. Howcast is also working on a project for the Defense Department.

Mr. Liebman says the company is willing to “turn over lots of different stones” in its search for profits.

HOWCAST enjoyed a break-out moment earlier this year, thanks to a five-second cameo appearance as one of the featured applications in a television ad for the iPhone. Downloads for Howcast’s iPhone application jumped from around 1,000 a day to 24,000 at its peak.

People who download Howcast.com onto their iPhone spend an average of 12 minutes on the site each time they visit, twice the amount of time spent watching from their computers, says Mr. Raman, Howcast’s head of product development. “That tells me that this is going to be a huge platform for us,” he says.

In the meantime, Howcast is exploring ways to distribute its content on other mobile devices and developing features so customers can buy items they see in the clips.

The company will probably need to do another round of financing in coming months. But Mr. Liebman is projecting that Howcast could be profitable by late next year.

If he’s right, the company could become the star of a new instructional video: “How to Create a Profitable Start-Up.”

Copyright 2009 The New York Times Company