July 2004

Umair has a very pertinent strategic analysis of Apple locking in its iPod customers into the Itunes store thereby aiming for short term profits instead of opening it up and finding different ways for creating value in the long term (i.e. leveraging their ITunes and Ipod by charging access rents).

It is a classic discussion of short term versus long term value creation process and disrupting your own strategic position (and competitive advantage thereof) by creating more innovation. Classic example in case also quoted by Umair is Intel's launching a better chip periodically. (for the records, Intel is a competitive advantage disruption case study for switching from its leader position in a mature market - RAM to an underdog in an emergent one - chips; that was as early as 1984) Umair is also arguing that since Apple can't replicate its innovative Ipod platform, it's just being protective.

Have these links as a reference for the context and read  part 1 and part 2.

A company with a cool animated tool explaining how to setup a weblog, how to use it, why have a weblog in the first place and its advantages over corporate websites or intranets. Very-very effective -- a lesson on how to effectively present your pitch (via Constantin Basturea)

Microsoft's Kevin Schofield has a cool tool - newsmap - an application that vizualizes differently the news aggregated by Google News. Neat!

Tim Bray is mentioning a telephone inflection point - basically a reshuffle of the potential services which in the future may transform some big names into some big losers. Good read and very useful links provided.

RZB is looking for consolidating its position in the Romanian market as it is interested to acquire CEC (the Romanian savings bank). Nothing new here, banks are looking for new ways of getting market share (and acquisitions are handy - read cheaper than most places in Eastern Europe) besides the organic growth coming mainly from the retail side. Keep in mind Baltzar's prediction that in 5 years or so there will be less than 15 banks activating in Romania.

As my O-zone post brought some traffic to the blog (though am not the only one) perhaps some of you may be interested in reading some of the O-zone "behind the curtain" stuff written by Tom Wilson in his Friday article from the daily Romanian ZF.

An overview of some of the applications in this space. I didn't think it was that crowded already.

Read and learn some advice from the trenches - a good overview of what it takes if you decide to work on your own. Also, it doesn't hurt if you browse MIT's entrepreneurship center for tips on the topic. (via Business Opportunities weblog)

Looks like it is the trend of this year after blogs in 2003 and portals in 1998. Ingredients: camera phones and free webstorage.

See what it's like.

And since I mentioned VCs, don't miss TJ's business plan surgery initiative. Basically it is free advice for business ideas and plans, so if you think you got that killer app. or just need a third party expert opinion go ahead and email them.

An older post from Jeff - very good perspective and benchmark on measuring various corporate indicators. Also, have a look at Brad Feld's take on the financial fitness for entrpreneurs and Fred Beste's view on secrets for entrepreneurial success. All three are VCs.

A friend of mine just got back from a a short holiday on the Bulgarian seacoast: "dude, those guys are way ahead of us!!!"

Loic's PR approach on selling his company Ublog to Six Apart. A good lesson on timing and on how to deal with your stakeholders (customers, journalists, etc)

That's the name of SAP's CEO and here is an interesting interview with him about enterprise resource planning software, competition and robots replacing offshore labor.

Over at Startup Skills Richard talks about how to sell in the software industry -- very good and to the point remarks, here are some pointers but do go read the entire post, the story behind and the comments are valuable.

- answer every email

- don't argue or criticize

- don't assume they [clients] want to communicate "your way"

- don't make them wait

- your company presence should be an example of your work

- don't make assumptions about your prospects

It finally happened, it was the news of the week I guess. Total value of the deal: 669 million euros for 33% with additional agreement of new share aquisition for at least 51% ownership. (the press release claims "new shares for between 723 million euros and 855 million euros, boosting its holding to 51 percent"). This acquisition would strategically position OMV for its target of 20% market share in the Danube basin. Am curious to see how they would deal with a 50,000-employee organization as OMV announced no lay-off plans.

I went to Astral's headquarters from Bucharest the other day as I was interested in upgrading my internet subscription. For people who've never been to Astral's internet customer service imagine a big room that has some sort of a small lobby with glass walls permitting seeing what the clerks from around are doing. The deal is that as soon as a customer gets in the lobby someone from the big room presumably notices him and takes care of him.

The annoying part is that those guys seem to be so busy that they don't really notice when a customer gets in. Furthermore there's no way of signaling that you got in so you either desperately try making eye contact with one of them (if you're in a hurry) or patiently wait until somebody notices you. And it can easily take 15-20 minutes until you may get noticed. How difficult or expensive can it be installing a device that signals the clerks that there's a customer waiting?

Similarly, the bank I usually go to is arranged somewhat the same -- there are 3-4 offices and few waiting chairs - all open spaced and spread over a 10-15 meter lobby. Thing is that you never know who the last person is, or who is waiting for what, which desk takes care of which service and so on. Now, the bank's customer service is quite well and the personell is very friendly and helpful - no complains about it. I was actually asking one of the tellers why they don't install a device so that the clients know where and when to go to a certain desk and she candidly say that this is not what she is paid for. I was astonished and mentioned that she may get a raise if she brings the idea to the management - bottom line was that she just got defensive and wouldn't want to get involved as it wasn't part of her job description.

Two stories and two observations - one management was/is not able to observe it (you only need to spend less than 5 minutes in the middle of things at rush hour to notice there's something wrong) and two the organizational culture that would encourage initiative and out-of-the-box thinking is hadrly present. I wouldn't call it an innovation, less a strategic thing - it is certainly something to improve the operational efficiency - but this should certainly come from within the organization. (see also the McDonalds example) Even though overall the customer service in both cases is good. Hopefully this is just a matter of when and not of if.

I just finished reading a very good article written by C. Prahalad (via bubblegeneration) on the unexploited wealth from the bottom of the society pyramid. What does it mean? It leaves basically from the premise that a good percentage of the world population (about 4bn people) earning less than $1500 per year represents a market that is not exploited by the corporations. As such, the author suggests that besides being an untapped multi-trillion market this segment can also represent an infrastructure for innovation testing and absorbtion which can further be transferred into mature markets. There are some intertwined elements to consider when approaching it, besides its cultural specificity - creating buying power, shaping aspirations, improving access and tailoring local solutions - and innovation in one leverages the innovation in the others.

I disagree though with the suggestion that multinationals (MNCs) are the only ones that should make this happen (working together with the governement and NGOs). The MNCs do have the money but they may very easily miss the cultural understanding of the people they're targeting, and actually there are two examples from Romanian business environment that support my statement. One is European Drinks - the Romanian market leader in the soft drinks industry and Coca Cola's biggest competitor/threat - ED has the best distribution coverage of the Romanian market which it also leveraged for entering other markets (i.e. beer - Burger is theirs). The second is Leonardo - the shoe store chain with also a very good market coverage (more that 100 stores all over the country) and which basically brings $3 shoes from China and re-sell them for $30+.

Of course one may also argue about those companies exploited some windows of opportunities but fact is that they saw the fortune fromn the bottom and they went for it. Even though, ultimately, their exit will probably be to the MNCs.

More on the implications and about "trendsetters" in this respect. (via Umair)

Very good pointers for people in this business - the way I see it there's plenty of niches in the online news market focused on Romania and/or Central Eastern Europe. Community is one of the key words I would start from if I were to approach this business.

UPDATE: And here is the example of a Californian newspaper that not only started from the community specific need of information but also lets its readers freely contribute.

We talk so much about different things it takes for one to succeed, especially when in an entrepreneurial position. Leadership, commitment, dedication, hard work, passion those are some key words that anybody would mention in this context. Yet, it is more difficult when it comes to make things happen, and I believe that stories like this one can only reflect that those words remain empty unless there are people behind them. And people are the most important asset in an organization.

It is part of Renault's broad strategy for emerging markets. They claim that Dacia Berlina and Break (which were made for the first time in 1969) are simply to costly to be produced and not too profitable at a price of about 4.500 euros. So they stopped making them and now the focus remains on Solenza and on the newly launched Logan available from September on and which can get to some 7.000 euros fully equipped in spite of the 5000 starting price. Still it is an economic car even though FT calls it a Frankenstein car. :)

Some teenagers from Constanta succeeded to fraud BoA by some $600k. Now they risk 15 years in prison and added some fame to Romania's reputation. It is interesting to note that this is just plain fraud and not "hacking" as many would put it. Combined of course with idiocy.

...of $32bn. That means about $3 per share, not bad, eh? Read and learn some of the implications.

A good piece in NYT (reg. required) about cell phones becoming more powerful hence enabling multifunctionality. Remember the x86s back 10-15 years ago? I guess that the phone industry is in about that stage now. (via Rajesh)

Marius sent me the link to the story of a McDonalds director who did a classical Porter move: decomposed its value chain in discrete activities aiming for operational efficiencies. Namely, this guy outsourced its drive-in call commands and achieved a drive-through order time saving of 30 seconds (a little more than one-minute per transaction, much lower than overall McDonalds average of 2:36).

Interesting insights about how the radio industry as part of the media market is likely to evolve -- reinvent the radio business as an audio programming delivery company and organize it to be relevant on as many digital devices and over as many forms of audio delivery as one can imagine. Also it is a very good and structured way of looking into a market and letting your mind play with possible strategies.

...is Alexandru Popa, a 24 year old dude who was Adrian Nastase's counsellor. Am curious to see what he'll be doing (if he makes it public) considering that he starts from a promising FDI level of 616 mil. euros at May end, and if we're to consider the announced 1.4 bn euros Petrom - OMV deal - he already accomplished the 2004 budgeted 2bn. FDI. 

Anyways, this guy certainly is one of the most promising characters Romania's got on the public scene - a strong background (international olympic while in college, Stanford graduate afterwards), founder of JCI Romania and (now) already two years of direct work for the prime minister. You can read from here the official statements (in Romanian) made when AP was named ARIS president.

It looks like the banks already started acknowledging the need to move aggresively into retail, with ING Bank being in the today's press for doing it. Actually the first sign was observing the works for a small ING outlet in the corner of my street. Then this morning I got to read the whole story. Also, if you understand Romanian don't miss Baltazar's interview about the industry configuration and his prediction of max 15 banks operating in Romania by 2009 and about a "very cosmetic" number regarding the official inflation number. Also he claims that the Romanian banking sector is the closest to the EU harmonization.

UPDATE: An overview of the latest news from the banking industry from here.

Alina sent me the link to an update on it.

Silviu has a good explanation on Matt's survey comments on corruption in Romania, leaving from Caplan's rational irrationality model:

"People hold crazy beliefs in politics because it usually costs them nothing. Diffuse costs aside, it seems a bit implausible that if you made a convinced Marxist dictator (making the consumption of irrationality in government policies more costly) they would quickly turn into a classical liberal type."

Also Doug says that Matt's observations are consistent to his own.

Am not sure you got the last edition of EIU's take on Eastern Europe latest development. (pdf)

Global venture capital industry declined in 2003, and the EU VC investments have significantly underperformed US VCs over the last decade. One explanation may be an ongoing focus of European VCs on concept and idea development with the associated greater risks that follow from development and time-to-market uncertainties. Does this mean that the idea prevails to the management team on this side of the world? I remember one of my profs saying that if he were to choose between an A type of idea with a B type of management and a B type of idea with A class management, he'd always go for the latter. Problem is that (especially in Romania and CEE) it is always dificult to find qualified people for making things happen, as entrepreneuship is not really part of the European business DNA. I touched upon this in an earlier post also Loic had good comments on it at that time.

More on it as well as interesting figure comparisons. (pdf)

While one is still weighing when/if to do it, others already jumped in the wagon. And yes, Jonathan Schwartz is Sun's president himself. Also, if interested in Google stuff read the so-called unofficial Google weblog, it's a good one. Besides the official one, of course.

This is something for people with free time - probably students or people in the 10-25 segment. Still it can be fun to do it once in a while, I know I've done a few times. The commercial part shouldn't be neglected given the level of social interaction - I find it similar to the ringtone craze, though it's not the same thing. And since I mentioned the IM business side, read Bill's take on IM data transfer.

Howdy folks, sorry for disappearing this way, I got some major disruptions in my life and had to travel to the countryside somewhere on this valley (coincidentally) for a while. Hope to get back to normal and update over the weekend. Thank you for your emails and submissions, also I've got no more gmail invites.

That was Matt's focus during his stay in Romania. Read the conclusions of his interviews and observations and also take a look at the pictures.

I guess it's quite an old one now, but have a look at Google's first hit when searching for coruptie (Romanian for corruption). Yeap, that's the Romanian government party, even though it is just a Google bomb prank. :) More on how to game Google from here. 

I got 4 to spare, if you need one drop me a line, first come, first served.