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Stories by John Blackham

Beware the hand that helps you

Watching, as three very different entrepreneurs shared the secrets of their success on the Holmes programme, I was stuck by two issues on which they were pretty much unanimous: Their number one reason for success was “hard work”, and they believed educational qualifications made little difference to their ability to succeed.
This is not new, but it got me thinking. Most people would see hard work as a key to success -- although it is more about persistence, having the tenacity to stick to an objective through thick and thin, and usually over a longer period than they had originally imagined. However, if hard work is the main reason for success we should be seeing more results in the number of local IT companies succeeding on world markets.

Written by John Blackham12 June 05 22:00

Seeking unions civil and financial

While I was visiting Christchurch recently I joined Tait Electronics CEO Michael Chick for a guided tour through the ICT industry infrastructure initiatives that have led Canterbury to dub itself Silicon Plains.
Tait Electronics is part of the Canterbury Electronics Group, a body whose six members export close to $400 million annually and contribute over $1 billion to the local economy. But CEG is just one of several Christchurch based ICT support organisations. Their software cluster, Canterbury Software, has close to 75 members.

Written by John Blackham26 Jan. 05 22:00

Does IT matter anymore?

Recently, while overseas, I was speaking to members of a software development company that operates in the enterprise software market. “We’ve just decided to halt development of a product,” they said. “It’s costing us millions to maintain our product development team and we’re just not making the level of new sales to justify the cost. We are looking at what to do.” They detailed three options:
1. Close down their development group: It would add millions on the bottom line but would not give them a future
2. Redevelop their software product, but that would take years and cost millions. And, after all, does the world really want another ERP system?
3. Resell one of Microsoft’s products, like Axapta: It would keep them alive but they would lose their unique IP and they would just be one of a large crowd.
So what is the future for that company? Over the years it has converted its growing knowledge of its clients’ industries into substantial IP value -– but without crystallising that knowledge into its own product it cannot see how to derive value from that asset.

Written by John Blackham26 Oct. 04 21:00

Living in a realtime world

The other night in the cinema, waiting for a movie to begin, I realised I was surrounded by activity - young men and women working their cellphones/PDAs. They weren’t txting but accessing online games and information off the web – killing time before the film began. This brought home to me how ubiquitous the internet has made the power of computing. When I started writing this column the idea of being able to access the internet from a movie theatre was still science fiction. We were still largely tied to our PCs, internet access was dial-up and mobile phones were for voice communication and txting by a few. That was just four years ago.
Today, I join a growing number of clients and colleagues who run their business from a wireless laptop wherever in the world they happen to be, and this is not simply to access email and information on what is happening in the office. For the lucky few who are able to live in realtim,e it means being able to make operational decisions and changes as events are unfolding -- not having to wait for a printed report, until the results are in and the outcome cast in stone. It is very hard to appreciate the period of change we are going through in the information age. Change is only really evident retrospectively and we are going through a shift in hardware and software development, the significance of which -- for most -- is hard to gauge. We cannot under-estimate the power of having information available in realtime as and when we want it, wherever we may be.

Written by John Blackham07 Oct. 04 21:00

When winter turns to spring

A nuclear winter. That’s how a US venture capitalist described the current business environment for IT in the US. Things are not much better here at present but I believe that we have yet to see summer in New Zealand when we compare our situation to the development of the IT sectors in other countries.

Written by John Blackham03 Nov. 02 22:00

Knowledge economy 101: Collaborate to compete

One of the most fundamental laws of the new economy is that knowledge can be shared without diminishing the provider’s own stock. It is a true win-win situation as it means that those who share enjoy a considerable advantage over people who do not. Yet there are signs that New Zealand is scoring an “F” in this particular subject at a time when we are already late entrants to the school of knowledge economy business.
Education and government are two areas of particular concern because they underline our attitude towards the fundamental precept of collaborating to compete. What are we teaching our children? And what is the attitude of public servants charged with supporting our economic development?

Written by John Blackham06 Oct. 02 21:00

Going nowhere in the comfort zone

It used to be that children wanted to grow up to be a fireman, train driver or nurse. Today it is lawyers and doctors that top the job popularity poll. Tomorrow our children will dream of being entrepreneurs or innovators creating and developing their own new business. Statistics show that, even today, most of our current IT students will start in jobs that are yet to be created. The pace of change is both exciting and frightening. It is going to take not only a different skill-set but also a different mind-set to equip our workers for the future.
This was brought home to me at a recent open day for industry representatives and soon-to-be technology graduates. More than 50% were Asian, a large percentage of them foreign students. Why is it that these students will travel from places like China to learn about IT yet it remains hugely unappealing to New Zealanders?

Written by John Blackham31 Aug. 02 22:00

It's time for venture development partnerships

Situations vacant: commercialisation coach wanted
New Zealand venture development company seeks entrepreneurial managers skilled in taking companies through the commercialisation stages of turning a seed venture into a successful business.
Your background may be in law, finance or marketing
BUT you will have experience in taking an idea and turning it into a business — for yourself or someone else.
Backed by the New Zealand Government VIF Fund, remuneration is commensurate with the senior level of this position and will include a share portfolio in the companies you coach.
Complete confidentiality guaranteed
Contact Serial Entrepreneurs Employment Agency today.

Written by John Blackham31 Aug. 02 22:00

Time to be bold and break the mould

In the dying days of the election campaign the New Zealand Herald tried to focus our attention on the maxim that Bill Clinton used to win office, “It’s the economy, stupid”. Its thrust is correct. Without economic growth the debate about other election issues, like law and order, education and health, is merely about carving up a cake that is becoming progressively smaller. The key issue is how to make the cake larger.
The Labour government, in its Growth and Innovation Strategy, acknowledged that the agricultural sector alone will not provide us with the size of cake we aspire to and identified the high-tech sector as offering the best opportunity for future growth. But betting on the New Zealand high-tech sector is a long shot, especially as just about every other developed country has made it a top industry development priority and — despite all the rhetoric — there is little sign of the seismic shifts in our allocation of resources needed to make the aspiration a reality.
It will take bold action on the part of government to provide the environment in which the ingredients for our high-tech cake are readily available. The VIF funding initiative is a start, but a very small component.
The three ingredients required to create new high-tech businesses are well known:
* Money-making ideas.
* Skills to turn the ideas into successful businesses.
* Money with which the businesses can pay for the skills.
The important factor is to have the three ingredients available at the same time.
It is embedded in the psyche of most Kiwis that we are a people with good ideas. While this view might be subjective, we can make a strong case that we are indeed an innovative nation. But what of the other two ingredients?
For years commercialisation skills, offshore marketing capability and experienced management have been seen as the main ingredient missing from our cake mix. Venture capitalists like to back teams with proven capability in successful baking.
In the previous issue of CIO I floated the idea of venture development partnerships as a vehicle for the country’s most experienced entrepreneurs to apply their skills to helping grow high-tech businesses. The column garnered positive feedback and could become a reality, provided we have the third ingredient in place — money.
For Kiwi start-ups the funding picture is bleak. In the world of venture capital it is drier than the Kalahari Desert. At the same time that Kiwi investment dollars are fuelling the property market, anecdotal evidence suggests no VC investment has gone into software companies for nearly a year. When a VC colleague recently asked me how many deals had been done this year I suggested they would be fewer than the fingers of one hand. The rhetorical response was, “As many as that?”
We are told there is plenty of potential venture capital looking for investment — up to $2 billion, according to Treasury last year. So why isn’t investors’ money going into ICT ventures? Have these suddenly become bad investments? Have the quality of Kiwi innovation and new business opportunities deteriorated so dramatically in the past year that, despite the best efforts of Industry New Zealand and others to boost the industry, they are no longer worthy of investment?
The problem is circular. Without commercialisation skills ICT ventures are viewed as too high risk for investors. Yet without investor capital, ventures cannot acquire the skills they need. The VDP concept has the potential to solve this problem but again the missing ingredient is centred on money.
The basis for the VDP concept is having experienced entrepreneurs invest their time in business ventures in exchange for equity rather than salaries since most ventures lack the funds to pay for the level of management skill that they bring. Having equity in the venture ensures the entrepreneur’s focus in helping to make the company a success. What prevents this model from working is an inability for entrepreneurs to convert their equity into cash when they have fulfilled their role. They need a way to liquidate all or part of the equity they build up. Being able to do this via listing on a reputable stock exchange such as the Nasdaq market or being acquired by another company looks light years away to someone investing time in a venture.
It is in this area that the opportunity exists to spur dramatic growth in the high-tech sector — provided the government is prepared to act boldly and support a local solution (to what is a global problem) rather than looking offshore for the answer.
The answer to this really could be quite simple — a mechanism in the middle that profits from everyone bringing the money and the venture together, promoting a flow of investment capital into high-tech ventures and enabling VDP entrepreneurs to make money.
This mechanism? Introduce competition to the stock exchange. Create a market of markets — a marketplace of stock-trading companies (each focused on specific market sectors such as software and communications) attracting investors based on their track record of offering successful investments. The NZSE currently has no competition — it is not performing because it doesn’t really have to. Not only is it the only show in town, it supports an arcane infrastructure, dependent upon the mumbo jumbo that surrounds the buying and selling of stock and a high level of investment required by a company to list in the first place.
It is really quite remarkable that at the heart of our capitalist system — the trading of capital itself — lies a moribund government-legislated monopoly that inhibits free market competition and effectively holds our future development to ransom. It is a system somewhat reminiscent of a communist regime.
If you buy fruit from your local greengrocer and the product is rotten you will give your custom to another trader. The competition helps maintain a quality product. Why is the trading of shares any different? The reality is that it is not. The NZSE model has evolved from an era in which people had to meet in order to trade and the shares were backed by hard assets for which rigorous documentation was required to ensure the transfer of ownership.
In today’s world, where businesses are based on intellectual assets and anyone can trade over the internet at a minimal transaction cost, there is a need for a new type of trading mechanism. Recent events in the US with the measurement of “new economy” company performance and the earlier dot-com fiasco attest to this.
Today you and I (CIO readers) cannot invest in ICT start-up ventures even if we want to. We are not allowed to. You are allowed to gamble away as much as you like on the horses or at the casino but not in start-up ventures, unless they go through the expensive and largely irrelevant vetting process associated with a public listing.
Buying stock should be as easy as buying anything online and with just as many risks — in other words, few. The reason stock exchanges are today being punished by investors is because they have not been held accountable for selling “rotten” stock. A greengrocer that sells rotten fruit won’t be in business long — nor would a boutique stock exchange that promotes bad investments. And as greengrocers know about fruit, so market vendors trading in software stocks would be seen as the acknowledged experts in that field. It should also be possible to rate the risk of an investment throughout its life and factor that into the value of the listed stock allowing “mom and pop” investors to readily evaluate their options.
To become successful, share traders would build relationships with the VDPs that groom ventures for listing. Just as a grocer depends on its growers for top-quality fruit, the boutique share traders would compete to list ventures reaching maturity. There is no reason why markets can’t become competitive, commercial and self-regulating businesses.
Creating the environment to create such new financial mechanisms requires a bold move on the part of government, but when one considers that the whole venture capital model that we are now copying from the US is less than 40 years old, why shouldn’t New Zealand be innovative in the way it fuels its new economic growth? We don’t have to copy someone else. We have a proven ability to create world-leading institutions. Why not do it again?
In the future IP-based world, the key resource (people) is a global commodity and while we may talk of dramatically increasing the number of technology graduates, our ability to retain them in New Zealand is at present highly doubtful. They will go to countries with businesses that can pay for their skills. If we are to compete with other nations in this field we must to do more than just try to catch up with them — we need really bold thinking so that we can leapfrog them.
John Blackham can be reached at ajb@xsol.com.

Written by John Blackham31 Aug. 02 22:00

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