04 March, 2017

Donovan's 70-word guide to building and operating a great business

A great business requires:
  • a purpose and proposition: what you offer the world, to whom (customers, shareholders, staff, communities, business partners), and why they'd want it;
  • a clear, coherent, consistent and elegant design of how you will make and fulfil that offer - core principles, processes, people, products, price, promotion, etc.;
  • doing what should be done to build that business (and not doing what shouldn't);
  • thinking, planning and acting for greatness.
First published 27 May 2013

23 January, 2017

Security - your biggest risk is your own staff

Businesses spend a fortune protecting themselves from outside security threats, but too few recognize that their biggest threat is from those already inside the security fence - i.e. their own staff. While 99.99% of staff are honest (give or take the odd dubious “sick day”), now and again someone on the company payroll may do some damage. The biggest corporate thefts are perpetrated by insiders - from simple pilfering (women’s fashion retailing notoriously suffers badly from staff theft) through bogus invoicing all the way up to stock option manipulation.

One area of risk that’s often overlooked is IT. The widespread use of outside suppliers and contractors is ripe for fake invoicing and kickbacks.  Malicious programming which steals a cent here and there over time can cost millions. Disgruntled employees can do nasty things to your systems, e.g. stealing your data, corrupting it, or building “logic bombs” to bring down your systems. 

While you can manage most of these risks, there is one group of IT staff that is almost impossible to monitor - your system administrators. They have the keys to unlock everything - because that’s what they need to do their jobs. They can read your emails, payroll files and personnel records. They can access your payment systems. They can install spyware behind your firewall. And they can cover their tracks easily, because their tools enable them to change just about anything that is recorded electronically.

I’ve heard many times that ”our people wouldn’t do that”. In most organizations, that is absolutely correct. Most system administrators are decent, hardworking, honest people. Many have a deeply ethical approach to their role. However, you never can be absolutely sure.

There’s no magic bullet for this problem. Some organizations only use long-term trusted employees as system administrators. Others vet new hires very carefully before appointment. Smart businesses carefully screen and select staff, manage and reward them well, look after them, deliberately cultivate an ethic of trust and integrity, oversee change processes very closely, and randomly audit transactions and processes. But in the end, you still rely on your staff’s personal ethics and the alertness of other staff.

Don’t kid yourself; the risk may be lower, but the risk is still there.

First posted  January 10th, 2008

11 November, 2016

Protectionism is the worst response to an economic crisis

Around the world, governments are under increasing pressure from their unions, manufacturers and farmers to re-erect trade barriers and instruct government agencies to buy local. In times of economic crisis, that’s the worst possible thing to do.

Buying imports enables others to buy your exports. In general, providing you live within your means, trade tends to balance out, and the more trade the merrier for everyone. You sell more of what you’re good at, and buy more of what others are good at. There’s possibly an argument to be made for temporary specific protectionism when you’re building a new industry which will be genuinely globally competitive once it has achieved scale and the barriers are removed; but generally, protectionism only transfers wealth from consumers and taxpayers to uncompetitive local suppliers.

Whether it’s in response to calls for US highway builders to use US steel, the NZ Army to buy locally made wet-weather-gear, or British hospitals schools and prisons to buy only British meat fruit and dairy products, governments must not yield to popular pressure (and their manufacturers’ and farmers’ naked self-interest). Otherwise, as the chart below shows, things will only get very very much worse. The Great Depression of the 1930’s may have been triggered by a stock market crash, but it was made many times worse by well-meaning protectionist initiatives and retaliatory moves by other countries. World trade plunged by two-thirds, industries collapsed, and many millions were thrown into the breadline. Let’s not even start going down that slippery slope.

First posted February 26th, 2009 and reposted post Brexit, Trump, et al