March 2004

You may remember that I was skeptical about the impact the Romanian e-Government initiative may have on the way people (be it ordinary or representing companies) would interact with the authorities via internet. I was mentioning the lack of the promotion and visibility as main causes for people becoming interested in using such tools. At the same time, I am not sure about the people from the top - namely authorities - being very comfortable with using such means for working.

In this context it didn't come as a shock when reading the results of a very interesting and quite new study (pdf) over at eDemocratie.ro. According to those guys less than 10% of the members of the Romanian Parliament are answering emails coming from citizens, with an average response of 6 days for issues regarding the New Constitution and 4 days for issues related to the European Commision Country Report. For a comparison, the figure for Canada is 45% and for UK is 22%. They calculated also a transparency indicator (0/5 - lowest/highest) showing the degree of electronic communication between citizens and Parliament members. Which is 0.29!!!  

More interestingly, people who made the study also provide two recommendations for people from Parliament when communicating via email:

- automatic reply specifying the email receipt and the time of reply.

- standard setting for Parliament members for using the email when dealing with citizens (the format, the timelines, the type of problems that can be dealt with, etc).

I would say that the recommendations sound common sense for people using computers on regular basis. My take is that they may sound somewhat weird for the subjects of the study. If anybody knows I would be very interested in the feedback the Government/Parliament representatives gave when reading this report. If they got to see it in the first place.

Matt Jones on Technorati and Michael Sippey on Expedia, Travelocity and Orbitz. Great stuff, web designers might wanna take notes. (via Olivier Travers)

Scoble is mentioning that Microsoft is moving into the blogs territory and thinks it is a big deal (of course not only because he is a Microsoft employee and one of the most fervent blog evangelists you can find in the webspace). I am a bit circumspect though having in mind that Google bought Blogger a year ago and it still hasn't figured out a business model.

Kit is mentioning an interesting article listing ten things never taught in design school. You may want to have a look, if you replace design with entrepreneurship those things may be equally valuable. Not to mention Kit's eleventh in the list:

"It all becomes harder. Because you find out how much you just don't know. And because you are losing your certitude that you are doing the right thing - largely because there are no more obvious choices, and a multitude of perspective."

It is oh so true. My take is never lose the big picture from your sight and always have a benchmark in mind. Having a mentor would be best.

It will be launched by the Romanian Capital Advisors, will have about EUR 25 mil. in a first stage covering Romania and Bulgaria and EUR 50 in a second phase covering the entire Balkans. The fund will look for industries such as financial services, FMCG, retail, health services or distribution, but will not exclude any opportunity. 

The RCA seems to be one of the most active investors in the area, it also manages Romanian-American Investement Fund which acquired a brokerage firm last month. They have a very diversified portfolio and appear to be among the ones doing more than declaring that Romania has an attractive business environment in the light of the EU accession. It is also true that the money for this fund comes from a sucessful exit from selling their part from Banca Romaneasca. They also have a 10-year Romanian market experience.

Umair and Seth Godin don't like the new Google look. They suggest something less boring instead - elgooG.

Yesterday it was NATO's official ceremony for accepting new countries. Bulgarians seem to be quite enthusiasts about it - calling Friday a national holiday (55th NATO Anniversary) and intending to issue free beer and wine (they didn't do it though). Romanians werenot as festive these days, but they made a big fuss when the decision was made a couple of years ago since the ruling party made it look like a huge internal political success. Michael from Glory of Carniola signals that Slovens were also cool and that they have mixed feelings about the accession in spite of 66% voting in favor of accession. 

UPDATE: Looks like Romanians are going to celebrate it as well. According to the Government's website April 2 will be a non working day and there will be some cultural events as well. It reminds me of the times when Ceausescu was celebrating the glorious days and successes achieved by the communists.

For people who are still not clear what RSS is. (via Heiko)

These tips may be applicable especially in a business having referral and reputation as drivers. One example: software development shops.

1.  Make cross referrals - get an alliance with firms providing complementary products. Example: software products with hardware products. They refer you and you refer them.

2. Work with charity organizations - this may not work in soiftware, rather in consulting: propose that for every referral that is sent from the charity organization to your business, you will take a percentage of your sale and donate it back. The same concept may apply in the case of business clubs or sport teams.

3. Talk to your barber about your services and get him involved - this is quite funny, but it makes sense, they do know and talk to a lot of people. More difficult in the case of specialized products such as software.

4. This one is more complicated - I am not sure how succesful would be in Romania, but here we go: write thank you notes to people you meet (at fairs, exhibitions, wherever). On the thank you note write down "by referral only". What does it mean? People need to know that you want and appreciate their referrals. The phrase, in essence, answers the question, "What can you do for me in return for this nice thank you card?"

Tonight I had an interesting discussion that made me think that sooner or later blogs will become substitutes for emails. I find blogs particularly more attractive when communicating to communities or groups, I just set up a special category for that community, and the communication is smooth. I can even make it user based access and a RSS feed is the answer to getting the messages in real time. I still have to chew on it though, but here is some more ground on this.

Over the last weeks I had an argument with a friend of mine about the utility of using Open Office. My side was that OO is still in an incipient phase not being able to substitute the main functions of MSOffice. Besides, it is not quite interoperational with applications written in MSOffice, and this would cause some problems when exchanging documents. Besides its availability for free his side was that the substitution rate was higher than I would claim. It just that I was not patient enough to put the time and effort to be more understandable for using it. Perhaps he was right. 

Anyway, it looks like Microsoft acknowledges OO and even created a competitive guide comparing MSOffice and OO advantages. Now that MSFT is mentioning it is just like validating the competition. Perhaps I should put some more efforts into it though. :) (via SAP Ventures via slashdot)

Quick facts and figures about the IT industry from Romania, from a today's piece of news:

- 6500 firms competing for more than $1bn. (includes software, hardware and IT services) with at least 100 firms with more than 1 mil. in sales.

- software and IT industry values some $550 mil ($440 last year) with double digit growth in the future. Out of this outsourcing and exports have the higher growth rate (20-30%) with a total of $170 mil in 2003.

Also the European Information Technology Observatory (EITO) claims that Central Eastern Europe's IT market is expected to grow by over 10% this year to 12.7 billion euros ($15.6 billion), after 9% growth in 2003. This is in the context of only about 17 percent of people in Eastern Europe to use the Internet compared with more than half in the EU.

You might have noticed that recently Google had a facelift of their website. I think it looks better - "cleaner" maybe. You may also try the new tools available from Google Labs - the one that I enjoy playing with most is the viewer which permits page displaying as a continuous scrolling slide show without using keyboard or mouse. Quite cool, just check it out by yourself.

Also, a while ago the launched Google local allowing searching within local areas. The service is available only for the US, it is still in the beta version and similar to UK's UpMyStreet. This is the segment which the industry specialists claim that search engines' potential will be in the future. As a side comment Microsoft just announced at the end of last week the launch of their own search engine - MSNBot - sometimes this year. Google's competition becomes tough with MSN and Yahoo coming strong from behind - I am still not satisfied with Google's search results.

You may happen to know that BG has this yearly habbit of isolating himself from the world - no emails, phones or other distractions - and just read and sleep for about a week or so. He is calling it the think week and the purpose of it is getting informed about innovative technologies or cool products for understanding the industry context and trends. I think it is a smart idea, it's very difficult not to get distracted by the daily events a - how many times did you find the time for doing a similar reasoning about your job or business for an hour or two at least?

Some of his thoughts after this year's think week include the big importance of security (#1 MSFT's priority) and how XML and Web Services revolutionized the data exchange process. Also he talks about wireless technologies and mesh networking - software making all kind of networks work together - and about the unifying trend on the network voice, video and data.

You can read the his interview about all this stuff and more from here.

Yesterday afternoon I went to the Zoo in Baneasa which is some 10 km away from Bucharest. By paying 15,000 lei (less than 50 eurocents) you may see a rather sad picture. I couldn't help noticing the following:

- the premise is very small, the alleys are dirty, and the animals seem unhappy - they look like they're in prison. In spite of these the place was packed with people of all ranges - teenagers, young families or old couples.

- when the place gets crowded everything around becomes messy - you will have to watch out for cars, it's plenty of illegal ad-hoc shops exactly in the street, pickpocketers, etc.

- the price is incredibly low - only by considering their potential target market and their purchasing power, my guess is that a 75-100,000 lei (3 bucks) is more of an appropriate price.

- the marketing is really poor - if you live in Bucharest and are interested in finding out about the zoo, you'd better ask somebody, there's no way to find out about it on any communication channel.

And this brings me to the topic subject. As this above example shows outdoor activities in Bucharest, if any, are very poorly marketed and/or organized. But what is exactly that you can do with respect to outdoor activity in B.? You could go to parks - there are several in Bucharest, but they all are very crowded. You could go attend some sport events - except for soccer games, all other events are poor marketed, it is difficult to find the info about it. What else? You could try some amusement parks, however it is just a a few of them and they are in very poor conditions. Or you could go outside the city nearby the woods or lakes. Umm, and if interested, I heard you could also go for a paintball round somewhere not so far from Bucharest.

That's about it. As a general rule, if there is anything that's worth the time, it is either packed or poorly organized. Or poorly communicated. Or any combination of those. If there's more, please do let me know, those are the ones I am aware of, and I am usually doing outdoor activities.

Conclusion: it is a big gap on several underserved market segemnts that can be filled out by an entrepreneurial mind.

On a final note, the good news about Baneasa zoo is that recently the problems were acknowledged (like everything else in this country) and recently a green light was granted for pouring some money for extension and infrastructure consolidation. (link in Romanian) Let's hope for a decent execution that is not going to take forever.

I just found that Espen Andersen has a blog and that's supercool. He was one of the smartest profs I had back at BI teaching Strategic Technology and Technology Strategy - he really knew how to present theory bits in real world perspective and taught it accordingly. Every once in a while when I look for good books, ideas and food for thought about technology and strategy I check his website, it is very resourceful. 

Go have a look at it if interested in strategy and technology thoughts. Besides joining the blogging community he also ackowledged wikis' tremendous potential, a concept currently on my "working list". You may also find there a very interesting email exchange about the outsourcing/offshoring debate with Bob Cringley. These days he is blogging from B2C 2004 - an annual seminar about innovation and eBusiness in retailing, banking and consumer services companies held in San Francisco.

Bill Gates on advertising industry: "advertising executives need to prepare for a world in which people will watch TV how and when they want to - and advertisers will need to figure out how to get commercials to them anyway." He admits that it is not crystal clear how technology will impact the model, but it will certainly be an enabler in re-configuring the whole industry.

Advertising will not be as aggresive as it is now, just think of Tivo which permits watching TV shows and skipping the commercials. I already mentioned it (here and here), ads success will lie in customizing the message to the individual needs. It will be more passive and focused, thus reducing wasted marketing on the corporate side.

You cand read them from here.

I just ran into an old post of Fred Wilson mentioning a book called Why CEOs fail. And the reasons for failure are:

1. Arrogance: you think that you're right, and everyone else is wrong. 
2. Melodrama: you need to be the center of attention. 
3. Volatility: you're subject to mood swings. 
4. Excessive Caution: you're afraid to make decisions. 
5. Habitual Distrust: you focus on the negatives. 
6. Aloofness: you're disengaged and disconnected. 
7. Mischievousness; you believe that rules are made to be broken. 
8. Eccentricity: you try to be different just for the sake of it. 
9. Passive Resistance: what you say is not what you really believe. 
10. Perfectionism: you get the little things right and the big things wrong. 
11. Eagerness to Please: you try to win the popularity contest.

One is andreiard, it belongs to Radu and his friends and you can find there cool drawings and pictures from Romania. For other cool pictures from Romania you may also check Adrian Tanase's tase.ro and Ciprian's Pisica Verde (Green Cat). Yet another one is troniu.dk maintained by a Romanian living in Copehnagen - Paul Petroniu Marza.

Another blog is called dbromblog and it is part of a bigger interesting website called dbrom. The name stands for "Din basmele romanilor" (Romanian tales) and it claims to be a place for weekly social satyre. 

All of them are in Romanian.

Very good idea in UK with public libraries from rural areas being provided with fixed wireless equipment. The idea behind is expanding the internet broadband availability in rural areas from all over the UK. The government philosophy is that libraries are one of the key public places to make internet services available to those that do not have connectivity at home. It all starts with a pilot project involving 10 libraries and about EUR 100,000.

I think it is a great and fairly cheap strategy for expanding the internet availability and thus increasing the computer/internet literacy within the country. Not very likely to happen in Romania anytime soon though.

Here is an interesting reading for the weekend about Shell's overestimating its oil stock with direct implications on their forecasted revenues and consequently the share prices. It was a bit of a scandal as such, especially that there is this temptation for making comparisons about corporate scandals from US and Europe (or Enron,Tyco, WorldCom vs. Parmalat). Nevertheless I cannot see Shell falling into this category. Firstly because this story looks more like one about poor management rather than about unethical behavior for financial fraud. Secondly, the money routing in case of a fraud would have been more difficult to be made, due to the European bureaucracy when reporting financial statements. On top of that Shell has an unique corporate structure coming from its more than a 100-year history. That means they donot even have a typical European governance structure label, it is more complicated. Of course anything may be posible in these circumstances but I just can't see it as a case. Yet. (via mellon732003)

I mentioned a couple of times (here and here) about my beliefs that one of the most attractive industries in Romania is investment management. It will grow not only from the expected foreign capital inflow but also from the local money. In spite of not so encouraging official statistics about Romanian purchasing power, people in Romania do have savings and they tend to keep them at bank. This is the result of two factors: lack of education and lack of alternatives.

Now, one involves the other and the latter means exactly the development of the industry. As for the first, I've got good news for you - Bucharest Stock Exchange appears to have understood it and acts accordingly. They developed a program, a virtual game to be more specific, called Invest targeting approximately 300,000 high school students from some 3,300 schools. The idea is new in Romania, but not worldwide - in grad school even myself I used to play a bit with Dresdner Kleinwort's trading simulation, a very good gig helping learn to invest in the stock market using a stock market simulator game. What is extremely surprising, in a postive way, is that BSE's management got it right, decided upon the strategy and now on the execution. It looks like this is part of a wider strategy of BSE becoming a regional leader. And educating the market is exactly what any smart company would have to do in Romania, if it makes sure that it is the one reaping the fruits later on.

It will be opened in Brasov, second largest Romanian city, but there are not so many details disclosed by the officials, except for the fact that it has 2264 sqm and will employ approx. 1000 people. I know from another source that Siemens only is going to have about 500 working in there. I will get back on this.

Glad to see some good news today. Romanian Andrei Postelnicu who is working for Financial Times in US was nomineed for the "30 under 30" award, meaning that he is in the top 30 worldwide journalists under the age of 30. Congratulations!

I was mentioning yesterday about the Romanian government's problem of promoting the business environment and the ooportunities an investor may find here nowadays. It seems that the Romanian strategy in this sense is at least strange, since the Agency in charge for doing this  exact job (ARIS) has the fabulous budget of $55,000. For the entire year.

This is a ridiculuos amount especially since the governement estimated about EUR 2bn foreign direct investments in Romania for 2004. Of course there are the long-expected 2 privatizations (Petrom and BCR) but even so, the $55k cover the most the Romanian participation at a show including the promotional materials. Take for comparison the 2004 marketing budget of some companies acting in Romania -- Flanco EUR 16 mil., Electrolux EUR 3 mil and Tuborg EUR 1 mil. And they expect some tens of millions in sales in return, not a billion or two.

UPDATE: It seems that in spite of that, in January there were some EUR 116m in foreign investments in Romania. This is what one may call a great ROI (return on investment).

Microsoft's John Porcaro recommends Patrick Lencioni's book Death by Meeting, which became a must read for me only by looking at the below short review.

The book is centered around the point that having a meeting to simply gain consensus or worst - give status - can be deadly. He talks about a company having four types of internal meetings:

The Daily Check-In - Requires that team members get together, standing-up, for about five minutes every morning to report on their activities for that day. Five minutes. Standing up. That's it.

The Weekly Tactical - This should last between 45 and 90 minutes with the following critical elements:

- The Lightning Round: A quick, around-the-table reporting session in which everyone indicates their two or three priorities for the week. This should take no more than 60 seconds per team member.
- The Progress Review: Routine reporting on critical information or metrics: revenue, expenses, customer satisfaction, inventory, etc. This should take only five minutes.
- Real-Time Agenda: The agenda should only be set after the lightning round and progress review are complete. This way the agenda will be based on what people are actually working on and how the company is performing against its goals, not based on the leader's best guess beforehand.

The Monthly Strategic - This is the most interesting and, in many ways, the most important type of meeting any team has. It is also the most fun. Here, executives wrestle with, analyze, debate and decide upon critical issues (but only a few) that will affect the business in fundamental ways. Monthly strategic meetings allow executives to dive into a given topic or two without the distraction of deadlines and tactical concerns.

The Quarterly Off-site Review - These provide executives an opportunity to regularly step away from the daily, weekly, even monthly issues that occupy their attention, and review the business in a more holistic, long-term manner. Topics for reflection and discussion at a productive Quarterly Off-site Review might include the following:

- Comprehensive Strategy Review: Executives should reassess the strategic direction of the organization, three or four times a year.
- Team Review: Executives should regularly assess themselves and their behaviors as a team, identifying trends or tendencies that may not be serving the organization.
- Personnel Review: Three or four times a year, executives should talk, across departments, about the key employees within the organization. Every member of an executive team should know whom their peers view as their stars, as well as their poor performers.
- Competitive/Industry Review: Information about competitors and industry trends bleeds into an organization little by little over time. It is useful for executives to step back and look at what is happening around them in a more comprehensive way so they can spot trends.

According to an email received from the Antreprenor Yahoogroup in 2003 there were a little more than 600,000 SMEs in Romania compared to 670,000 in 2002. Also in 2003 all those small and medium companies employed about 50% from the entire Romanian working population and contributed with about 60% to the GDP. 

These figures don't come as a surprise, in any healthy economy SMEs represent the growing engine. It is worth noting though that SMEs output represents 60% of the GDP in spite of a less favorable Romanian regulation. The legislation is burdening at times and under these circumstances a Romanian entrepreneur will always look for ways to avoid it. Now, there is a clear distinction between tax avoidance and tax evasion. In a telephone discussion I had last week it was mentioned that actually Romanians are tempted to look for finding innovative ways for avoiding the legislation.

No honest people would look for evasion. But when trying to avoid stupid laws sometimes it is a very thin line until you may break others. My opinion is that it is inevitable to do so for the simple fact that the legislation is not simple and straightforward. There are so many little things one will have to consider when studying or applying it, that he/she'd better have a good experienced accountant. Should it be easier and more clear for everybody, perhaps Romanian entrepreneurs would be more tempted to manage their business than trying to find ways out when dealing with the State bureaucracy. 

Rajesh Jain publishes a great piece about how small medium entreprises can make themselves known in the information marketplace. I think it is a fairly cheap and smart promotion strategy, you can just read it below:

"Here is how the SME Trade Information Marketplace (STIM) works.

An SME publishes a wiki and a weblog. What is different about both is the ease and immediacy of how they can be updated. Think of the wiki page as providing an outline of the SME's business - it is like an "About Us" page. It can provide links into the SME's website.

Why need a separate page from the website? Because it is hard to update most websites! Even after nearly a decade of the Internet, the design elements which make up the website and permissions required make it difficult for an SME to update its website on its own. A wiki does away with traditional design and just focuses on the information. Its simplicity of updation and the addition of new pages makes it easily manageable, without the need for any intervention. Simplicity of design is what Google has pioneered, and what wikis can take further.

The weblog is akin to the "What's New" page. This is where the SME can post new business developments, product releases, buying needs, links to relevant articles, commentaries on other developments (or blog posts). The weblog is like the SME's periodic newsletter - the difference is that it not emailed or distributed, only published. A weblog makes publishing very easy. Each post has a permalink and is therefore always accessible and can be linked without suffering from link rot.

Taken together with the wiki, the weblog now offers the SME a way to provide the necessary background as well as the recent updates about the business and perhaps the industry in general. What is disruptive, as we shall soon see, is the RSS feed produced by the blog and a "ping" sent out to a central server whenever the blog is updated.

In addition, an SMBmeta.xml file (as outlined by Dan Bricklin) offers meta information about the SME - contact information, type of industry, and so on. It is a file that is machine readable and can be picked up and searched by special programs. Thus, it becomes possible to build up a searchable distributed directory of SMEs across multiple parameters with the information provided and kept updated by SMEs in their space.

Thus, the wiki, weblog and SMBmeta data provide the SME a self-publishing space. The SME is not required to post information on any central locations or directories. Write in your own space is the message to SMEs. And give them the tools to make the writing easy and instantaneous. And then let magic happen!

The RSS feed published by the SMEs contains the content in the blog posts. What is interesting about RSS is that it can be "subscribed by anyone using an RSS aggregator. This means that whenever there is an update, the new item is made available to the subscriber without the publisher having to broadcast it. This publish-subscribe mechanism is at the heart of the STIM.

So, now the question is: how does an SME find out which feeds to subscribe to? There are multiple ways to do this: first are the "strong ties" - companies or people known whose feeds (or their company feeds) which can be subscribed to; second are the "weak ties" which emerge from the searches across the blog posts (and notifications based on these searches). For example, if I want to look for a knowledge management solution, then I can set up an alert for all new blog posts which have the phrase, or do a search on the older blog posts for relevant posts. Either way, the control is with the SME on which feeds are subscribed to. An additional way to find new SME feeds is via metablogs which can be created based on certain topics. For example, these blogs can be based on geography (within a certain area) or on a specific topic.

So, the solution is to get SMEs to start interacting via the STIM in an open, transparent way. By catering to their own self-interest, they can ensure that they all will be better off - they have nothing to lose by participating. Over time, as the SMEs make money, they can now invest in technology. Hopefully, this cycle will help SMEs grow.

The interesting thing is that the STIM is not a trading market, it is only an "information marketplace". There are no commissions payable on the business generated. What the STIM ensures is that SMEs get other SMEs in - the value increases exponentially with every SME joining into the system. So, there is a "viral marketing" element embedded into this idea. The STIM is the intervention, a disruptive innovation, which can transform how SMEs buy and sell, and how they use technology."

Adrian Florea signaled me more Romanians from worldwide keeping a blog. The blogs are very technical written as those guys are working for Microsoft (Monica Boris and Florin Lazar). Adrian himself has a blog in Italian about .NET related issues. Also, two other Romanins working for Microsoft have personal websites: Bogdan Crivat and Eduard Koller.

This is what the former president of the American Chamber of Commerce In Romania (AmCham) claims. While I agree with his point of view, this of course could be debatable. From a business plan perspective corruption can be perceived as yet another variable. It is the frustration that you have to put a lot of effort in "doing the right thing" for ensuring a smooth environment for your business that is important. And this comes at the time cost of creating and executing your business strategy.

As cynical as it sounds, once you know how to play the game it will not be such a big deal, it's just an overhead combined with a routine. You may even call it networking in a sense, you just have to have a predictable event that will not destroy your business plan. As such, I think investors interested in coming to Romania are not as scared by the corruption as they are by the uncertainty that corruption or changing legislation may signal. Don't get me wrong, corruption is not something that I am proud of, on the contrary. It is just not a factor that should make me shy away when executing my business plan.

My constant readers may already be familiar with my theory that Romania's joining the EU should not be a mean but rather an end in the economic strategy for creating value at the national level. Joining the EU will certainly have its benefits as well as downsizes but a (now very often vehiculated) delay will not be a drama.

This is what representatives of foreign companies in Romania are also saying - long-term business and investment plans are not conditional upon the date of Romania's accession to the EU. This will only affect the country credibility outside its borders. And this is what I call a marketing problem. Given that on the national level the government is doing the right things by ensuring a proper and stable business environemnt, one of the most important tasks is promoting such a biz environment (the value proposition) to the investment community. Thus attracting foreign direct investments is just a marketing and public relations problem. And it shouldn't be that difficult, even though the last 14-year history shows us the contrary.

This comes as an addendum to my post about Romanian R&D. LaDorna announced acquiring a State-owned research institute - Poultry and Small Animals Research Institute. Why do they do that? Firstly because it's cheap - EUR 8.8 mil. Secondly, because it seems that the group which is a market leader in the Romanian diary product industry confirmed its interest of horizontal expansion in Romania. This means they will look for entering into the poultry industry by launching chicken-based products.

Is it a good move? Depends on what strategic targets LaDorna has. If I am to judge after the poultry industry characteristics, it may prove quite a challenging one since it is a capital intensive industry, with technology investments being very important for first movers. Then agreements with the wholesale distributors are important as well, but LaDorna may not have problems on this one since they could leverage their actual distribution system. Brands play an important role in customers' choice, so they will have to own one or two if they want to havea piece of pie. Finally, the Romanian poultry industry is quite fragmented nowadays, and an acquisition would not be a surprising move for business development and gaining market share. All in all I think it may be an expensive and risky strategic move, but the higher the risks the higher the returns, right?  

According to a survey made in Hungary only 2%-3% of the applicants are suitable for private equity investment. The reason is fairly simple: the lack of an adequate business plan. At the same time, investors mentioned that they expect between $300m and $500m in new venture capital investment to come into Hungary between now and 2005.

This time in Hungary. While in Romania they announced EUR 400m for energy and gas investments, in Hungary they will invest EUR 240m in a solar panels factory and a trailers manufacturing facility.

It will be mr. Jack Dyer Crouch who is associate professor for strategic and defense studies at the Southwest Missouri State University. He is replacing mr. Michael Guest, who took some open positions about the evident corruption in Romania. On the other hand, there's some voices accusing mr. Guest of covering up some dirty business. I have no idea whether it's true or not, I only hope that whoever is in charge will be able to do something about the humiliation process Romanians have to go through whenever they need a visa for traveling to USA. And this, my friends, is one of the most horrible experiences anybody born in this part of the world can face in a lifetime.

...totalled last year some EUR 730m and 80% of the market is controlled by 10 companies. That means there is plenty of room for new comers aiming for specialized niches or for competing on premiums. Also, I am expecting a boom in the middlemarket - the insurance brokerage side, it is a good expansion channel for business development, especially for big players. Top players last year were Asirom, Allianz-Tiriac and ING Nederlanden.

A while ago Microsoft's Scobleizer was mentioning that the HR department from MSFT was setting up a blog for advising candidates interested in applying for a job. I have to admit that I was very circumspect at that time, considering my strong opinion about the poor job HR people tend to perform and affecting thus the bottom line of a company.

Nevertheless, I doubled checked it yesterday and I will have to admit that in this case I may be wrong, the Microsoft's HR people seem to outperform themselves, there's tons of good advice you can take from there if you're looking for a job. At Microsoft, of course, where meritocracy counts, I doubt that in Romania 5-10% from the tips would work out given that the good old networking is king here. And there's no signs of meritocracy at all, just look at the top level. But of course the adage "it's not what you know, it's who you know" is valid in any society, my brother who lives in NY keeps saying it all the time.   

Since I was mentioning the PC Forum eventspace, this is what Google's Erick Schmidt mentioned in an interview from this event: 

"our business model generates enough cash from operations that we do not need to go public" -  it is a very diplomatic take, while it may be true nobody actually says that Google considered to go public because of the pressure from their investors who wanted the dough. Great to see that Google's management was smart and persuasive enough in waiting to figure out a truly competitive business model.

"Nobody gets what they want as the first result, so people are dissatisfied with the product." - I have been very busy these days and I needed a good search engine big time. I have to admit that I wasnot satisfied with Google at times and switched to Yahoo. And I got better results. I have no idea why is that - I am not sure it means either has a better engine, but it certainly proves my above claim of Google having to be patient for building a good biz model.

Read the rest here, it is interesting. There are also interviews with Yahoo's Dan Rosensweig and AOL' Jon Miller.

It is starting to happen. Finally people from the television industry started to understand that they cannot beat a dead horse and keep the questionable quality of TV shows by forcing viewers to take lot of crap for entertainment. Or switch to different forms of entertainment in the best case scenario.

BBC is launching an interactive TV show where viewers will be able to compete via interactive TV, the internet or a Java enabled mobile phone. That is a great idea, technology enabled that will probably lead to changing the outdated business model of the television industry.

Some of you may know that there is this C-level conference (C from CEO, CTO, CIO, etc) happening somewhere in Arizona these days - PC Forum. Nothing extraordinary here, it is an interesting event as any other hundreds happening all over the world every year. What is however very interesting is that the conference is open to public. For the second year. That means that anybody with an internet connection can follow up the debates and/or ideas discussed during the event. In addition, anybody can interact with attendees and benefit from the self-organizing content of the event.

This is the meaning some of the early visionaries in the industry gave it to social software, and my two cents are that it is going to shake some industry boundaries big time. Me thinks of building such a tool as well.

This is the title of a conference I attended on Friday. Quite interesting four hours with debates that were so intense that we all forgot about taking breaks. Hence it was less about the schmooze and more about the Research & Development and Small-Medium Entreprises problems per se. Here are some observations:

- presently the R&D budget allocated by the Romanian government is 0.8%-1% from GDP. There is a memorandum (work in progress) for promoting the figure to be raised to 3%. The EU actually has the 3% budget as a target for all its countries set to be met by 2010. The rest of the figure is supposed to be attracted from the industry side.

- it was evident to me that there is not a clear vision and strategy as such about the Romanian R&D. I found out that there are so many groups and committees and representatives and organizations that in some way or another have anything to do with R&D (read bureaucracy of course). According to a director form the Minister of Research a few months ago the prime minister himself asked to see a strategy and a plan. Up to date: it's not even on the paper, everything is on the discussion level.

- moreover, it appears that there is a chasm between the market and the research themes, or lack of their applicability thereof. The subjects to be researched don't come via SMEs or big entreprises so it appears logical to find it more difficult when looking for projects funding from industry players.

- the EU has a target to become the worldwide R&D leader in 10 years or so - quite challenging task I would add only if we're to consider the European brain drain to USA. This is the context where the Romanian research environment has to be placed. I should mention that the Romanian contribution to the EU research budget is about EUR 55m and half of it is sponsored from Phare funds. Even so, according to officials, Romania is not able to have its investments paid off - meaning no projects worth the value of the budget. And that is a management problem.

- I kept hearing arguments such "we are good, or capable, but nobody hears us, nobody knows us". Again, that is a management problem. Or marketing, to be more specific. However, they're finally acknowledging that and they take some action; as such they will build a presentation website and a web-based database for keeping track of SMEs and related projects that can benefit from EU funding (through ERA).

- I am still not clear how myself, as a SME, I would benefit from being involved with any governmental research-related organization or with asking EU funds. There is no motivation whatsoever for at least three main reasons. One is very high bureaucracy when registering or filling out forms - estimated time only for this is between one and three months. It seems that the Romanian Chamber of Commerce will start offering consulting for this though. Another reason would be that the legislation is poor if we're to compare it with the competing SMEs from Central Eastern Europe. Why? 1. Romanian SMEs pay taxes for reinvested profits and 2. Romanian SMEs pay taxes for importing technologies - consequently, compared to CEE firms, Romanians pay an extra of 33-35% for investing in research and development. Finally, the research subjects most of the time are not on marketable products, hence there is no incentive for an SME in partnering for funding a research project.

- building on that, since capital scarcity is well-known among SMEs, why would they target SMEs in the first place without having a proper infrastructure (legislation, industrial clusters, etc). Why not market it to medium or big companies which can afford it? One answer of course is that big firms can afford to research in-house, but how many of them would? It is not uncommon to outsource R&D nowadays, given that you have MARKETABLE projects. The lack of marketability comes from the fact that the research areas are decided by the research institute and not by the market factors.

You can read it from here (PDF) it is very interesting (I know, it's been around for a while, but it takes time to catch up with everything - you'd better have it twice than miss it). As Umair puts it - the best short course on economics and finance you will ever have.

There's been some major changes in the coffee shop industry lately, with first movers undertaking innovative actions in their markets. Starbucks was among the first ones, when instead of competing on prices and making its services a commodity, looked for adding activities that reinforced each other and created a unique value proposition for customers. One notable move was offering free wi-fi (wireless internet) to its consumers, and I have to admit that it was quite cool sitting in the coffee shop, sipping your cafe latte with the laptop in front of you and emailing, or browsing for the latest news or just reviewing a document. And they offered this service for free. Now, in addition to internet, it looks like Starbucks decided to play another card: music downloads to go -- you just listen for free to anything you want from the Starbucks' music library and if you like it, you order it, you have it written on a cd and pay as you go.

I think this is a brilliant strategic move differentiating very clear Starbucks' value proposition centered around a great customer experience. Is this disruptive? No. Is it easy to copy? Definitely, even though they're being the first movers. Is it innovative? It certainly is.

Note to Romanian coffeeshop owners: customer experience involves among other things good, attentive service, a clean place, music at lower levels, and waiters with a smile on their face. A great customer experience may imply making them feel like home.

According to Gartner a quarter of Europe's IT jobs will have moved to the developing world by 2010. India will still play the primadona role, but will face tough competition from Russians, Chinese and Eastern Europeans. Also the competition will not only be based on price but on certain specialization the outsourcers may take (i.e. call centers, high end applications, embedded, etc). The most open to outsourcing in Europe are UK companies followed by the ones from Germany, Switzerland, Austria, France and Italy.

At the beginning of this month Romanian Fabian Toader sued Kazaa claiming he had written the computer code in 2000 while working as a freelancer. Apparently this is not the first trial between the two, the dispute started last summer when Kazaa sued Toader for blackmail accusations. Toader claims he owns the code (according to the US laws) while Kazaa says that Toader did the coding while he was under hiring contract. It seems to me that it is just a combination of Kazaa not fulfilling their entire (financial) obligations combined with court threats and ego games from both sides. Who do you bet your money on?

And by the way, Toader is asking for $25m and presently he is making a living by working for Microsoft.

Read these impressions of an American dude who went to Bulgaria...some of them sound so much like Romania.

Since I was just talking about investments I think it is worth a quick mentioning of the interest of 2 Dutch companies in Romania. The first one is Stork Fokker AESP involved in aeronautics and avionics industry. It is a joint venture, with the Dutch making the technology transfer and the Romanians providing the facilities. Second one, Rynart Transport Klundert BV, already bought the land somewhere in Bucharest for building a logistics warehouse center.

It is Bancroft Private Equity backed by JP Morgan Partners, IFC and NIB Capital.

If you read the Central Europe PE confidence survey I mentioned a couple of weeks ago, you may have noticed that Bancroft was among the investment shops group targeting to raise about EUR 1.5bn for investing in Central Eastern Europe. This is what happened last year, Bancroft managed to raise EUR 80 million and now is looking for opportunities.

The target is strategic and mature companies, led by experienced management teams with successful track records, though not necessarily market leaders. The expected average size of each investment is EUR 6-8m, which means medium and large companies in Romania and they expect an exit in 3-5 years. According to Tamas Szalai, their Budapest investment officer, in Romania Bancroft is presently looking at food industry, FMCG, distribution and logistic of goods. However, according to their investment criteria listed on the corporate website they consider any industry except armaments, tobacco, spirits, gambling, and most kinds of property investing.  Should it find attractive investments it may also open an office in Bucharest. Presently Bancroft's only funding in Romania is a minority stake in Mobifon.

UPDATE: Two weeks ago at the OPIC conference from Bucharest 2 other US-based funds announced to consider investing in Romania. One is set up by the OPIC itself funding 45% of an $145m fund and currently looking for a partner to sponsor the rest. The other one is a EUR 150m fund set up by the Small Enterprise Assistance Fund from US.

Cool diagram mapping the online information flow. Of course blogs and metanews channels have a role here. Found via Viral Marketing Blog.

A while ago a friend of mine was supposed to make a presentation in front of a 20-30 people audience and he got cold feet. Now, this is understandable, it was his very first time. From my experience, apart from keeping cool (emotions are inherent especially for people not being comfortable when speaking in front of others) the best trick for a good presentation is to know your stuff. Do the homework beforehand and know what you're supposed to be talking about. As long as you have good knowledge about it, then it is just a matter of how much you connect with the people from the audience. The more you connect, the better the chances of a good communication process.

But how do you get to connect to your audience? Be ready to have a story behind your presentation, it's catchy and the audience will not get bored. You may crack a joke or two, be funny but don't exaggerate. Be sure of yourself. Be knowledgeable. Be polite and to the point. Don't give your audience the sensation of their time being wasted, it is a sign of respect. Always answer questions and make sure you're to the point. In case the answer requires a longer time just mention you can develop it at the end of the presentation. And do that. Don't forget the body language, stick your hands out of your pockets and make use of that slide projector. Finally, whenever in doubt stay calm, just use your common sense and, again, be sure of yourself. Or at least try to give that impression.

I got an article published in the last issue of Romania's Computer World Magazine. It discusses reasons for companies from manufacturing industry when looking for outsourcing services and/or processes. I also mentioned a set of industry practices as well as commented on some of the future trends.

Unfortunately the article is not available online as of yet, my understanding is that they will soon publish the paper version online. You can find the pdf version over at Krogos Research Reports though. (the article is in Romanian)

You can find here (PDF) the Economist Intelligence Unit's forecast for Romania in the years to come. It says that in spite of the expectation of completing accession negotiations by October 2004, and a commitment by the European Commission to support Romania in its objective of joining the EU in 2007, there is a significant risk that membership will be delayed until 2008-09.

"The EU's difficulties in absorbing ten new members in 2004, as well as the reform challenges facing Romania, are likely to delay membership. However, the accession framework will provide incentives for the government to persist with reforms, leading to improvements in the business environment."

In the meantime, the guys from CSFB consider that even with a strong push it is not realistic for the government to close all chapter negotiations before October 2004. They are polite enough to mention though that even in this case, given they close chapters in the next 12 months, the 2007 target date for EU integration remains credible.

I think that the 2009 accession date appears to become more credible since this year's integration of 10 countries may take longer to be digested. Also, I don't believe in things done under the time pressure, several details may be overlooked - this is what actually happens in Romania. I am not worried about it though the EU integration should be a mean not an end.

The transportation minister is dreaming about high speed trains from Bucharest to Paris after 2012. I have been hearing this kind of stories since 1990 both about the railway and highway infrastructure. In fact I have heard this refrain for so many times that I cannot help looking outside and think that perphaps spring asteny may have a role. Or perhaps only the fact that it is an election year.  

It's been a while now since "Have a story or a link"  link is functional. Some of you already have noticed and sent me interesting stuff and I thank you for that, I really appreciate it. Some didnot get posted, and I feel I should make some clarifications about it.

@rgumente cannot function without its readers. As such I am interested in any stories or links that you may have. When sending the story do not forget to mention a URL linking to the comment. I receive quite a few submissions on weekly basis, and for getting them posted please do keep in mind the below guidelines before submiting. Not respecting them may lead to not having your story posted.

The idea behind @rgumente is providing links and interesting comments to stories written elsewhere on the internet. The stories have to have some consistence not only the raw data and they will have to be related to the content of @rgumente - business, technology or strategy -  be them funny or serious. Also the stories you send have to be recent. Old stories are unlikely to get posted. Also, please don't send me comments like: "I think that this company/product sucks" without having good arguments and/or without mentioning a link to your arguments. Even if I may agree with you, it is unlikely to post it unless I have a URL behind it. 

I look forward to your submissions.

Skype announced raising $18.8 million in series B funding. I mentioned about the company a while ago, Skype is peer-to-peer telephony (p2p) invented by Kazaa founders.

Om Malik thinks that it is a great idea, though not such great business -- "I still don't see a business model."

TJ, on the other hand, sees potential for making a profitable business -- viral marketing at a great scale, clever product working better than any VoIP product ever before.

I agree with the latter.

Over at Czechout I found out that 90% of a Czech TV show viewers believed that the State deserved to be cheated on taxes. I wonder how much the percentage is in Romania. Btw, I paid my apartment and car taxes today (yesterday already) - last day before penalties would be applied. Horrible experience as always whenever you deal with Romanian bureaucracy. I stood in line for about 2 hours, with about 20 people in front of me, waiting for one operator to take our money. 10 people per hour for only having your money taken and having the receipt printed - great figure for a productive day, huh?

According to a survey made by Bestjobs.ro among its users (link in Romanian) 70% of the under 25 years old questioned believed that it will take less than 3 months until they'll land a job. 

Romanian job market has some interesting characteristics, in spite of an emergent region with plenty of opportunities, it is difficult to get a job as a fresh university graduate. Why's that? Most employers require full time work experience for entry level positions even in the case of a new graduate. Well, it is not uncommon that Romanian students usually have a full time job during their studies, but how can you expect somebody freshly graduated to have "at least 2 years of working experience and good grades". Believe it or not, it is very possible in Romania. Even so, every year there are SO many students graduating that the labor supply is way higher than the demand, and it is increasingly difficult for graduates looking for an entry-level job to differentiate.  

On the master level, it may get to the other way around. Don't be surprised to find out that there are employers who think that if you have a graduate degree (i.e. an MBA, MSc or PHD) and 2-3 years of fulltime relevant work history you may be overqualified when aiming for a middle management position or underqualified for a top management one. And what does this translate in, my friends? Cheap, qualified labor cost.

I mentioned a while ago about Microsoft opening an IT Academy at Galati within the recently opened software park. That means clearly that international technology companies understood very fast the tremendous potential of Romanian human capital. Consequently, Oracle makes a smart move as well by investing in the Oracle Application Initiative at Bucharest's Academy of Economic Studies. (link in Romanian). This means that students from one of the largest Romanian university will be taught how to use Oracle E-Business Suite applications. Guess who is going to reap the fruits? Either Oracle or its clients - tough question, huh? 

Ed Daniel, who happens to be our client at Krogos, pointed me to this article about what offshoring may involve. It has too much meat on it to discuss it here, here is a little preview though:

"[...] most organizations experience a 20 percent decline in productivity during the first year of an agreement, largely due to time spent transferring knowledge to the vendor, according to the META Group study. In an offshore situation there is a certain amount of process that has to be done the same way. [...] Once the vendor and client get aligned and streamlined they will be able to work together much more effectively, and that has a great implication for cost.

Although it seems a bit disappointing, this projection is not all that grim. CIOs should take heart in the fact that most companies see savings around 25 percent in their first year of outsourcing offshore. [...] As both parties mature, cost savings of 40-45 percent are not unreasonable in the second or third year"  

Websites are starting to become more popular for getting the news according to the State of the News Media 2004, the latest yearly study about the American journalism. According to this study the traditional media channels are facing a serious audience decline, the only medium with increasing rates being the online content providers.

This is a serious shift and without investing in building new audiences the long-term outlook for many traditional news outlets seems problematic. At the same time, the traditional media looking into online journalism may not be as profitable since the paper being cannibalized by the online content is not having the same success rates as the old model did. Subscription model doesn't seem too lucrative since information became a commodity, switching costs are close to zero (it's plenty of sources outthere) and, more importantly, the trend is towards increasingly getting the raw elements of news as the end product. That means more data and less analysis. Neverthelss, online advertising seems to have better odds this year both on classifieds and ad segments.

So what is the situation like in Romania? No figures whatsoever, I can only assume from my observations that TV stations and newspapers are the strong leaders both in terms of news audience and revenue generation. Even though with marginal market penetration figures most of the newspapes have an online presence, and only one is subscription-based: Ziarul Financiar (Romanian FT version) - rumours say that the newspaper has never been profitable though. Evenimentul Zilei appears to be the most popular with almost 200,000 hits per week (#6 in the general top and #1 in the news top - @ trafic.ro) and Gazeta Sporturilor (sports-only newspaper) is closely following with about 100,000. Even though the online market share is quite low (since the internet penetration is low in Romania) - my take is that they make quite a bit of money, since they count on a loyal market of readers.

As a paranthesis, it is surprising to note that in spite of the declared Romanian opening towards foreigners there's no such a thing as an English based newspaper (I know there is one in each of Sofia, Budapest, Warsaw and Prague). Ok, I know, there is Nine O'Clock but it's too wordy to my taste - I may be a bit subjective here. There's one website updating daily a couple of news - BusinessRomania.ro and another weekly magazine that is subscription-based - BBW.ro. Don't even think about the RSS feeds.

What is next in Romania? I think that internet will become increasingly a reliable source of info for a young and educated segment. Online advertising will be a good revenue stream and I am not expecting the pay-per-news model to be profitable very soon. At the same time, the TV stations will have to make a change, since the content is increasingly becoming aggresive, negative and full of junk. And it lacks originality, you can see the same news at every TV station. And this will reflect sooner or later in their audiences. Arguably, to a larger extent this is what happens in the newspapers, perhaps with few exceptions. In spite of that, switching to internet news sources is not going to happen on the national level so soon for two main reasons: lack of understanding (or education if you want) and lack of money. Not only the internet penetration numbers are low in Romania (be it dialup or broadband), but also the computer spending/capita rates. And, unfortunately, as cheap as Romania may be nowadays,  compared to Western standards of course, making a living is quite challenging.

I had an interesting discussion last night about a previous post I wrote on wasted marketing. This friend of mine suggested a different way for broadcasting TV ads: make the viewer choose them.

I think there are two main aspects to consider: the infrastructure and the model per se. The first one looks like it is going to be solved soon. Apparently giving viewers the option to choose would be possible if the TV station is broadcasting digitally, and it appears the the EU legislation specifies that by the end of the decade all TV stations should broadcast digitally. Thus the technical problem is overcome.

The model leaves from the assumption that the viewer will make an ad category ranking. Consequently he may choose his preferences from a list of ad categories (i.e. alchohol, detergents, sport equipment, etc), and the TV station will accordingly direct the ad stream to the TV box the request came from. Why would a viewer do that? He won't, he will be forced, and this is where I think the model has sensitive areas. Perhaps giving him some sort of incentive may be a solution.

Consequently, the advertiser will have a better knowledge of the consumers' preferences, thus reducing the probability of wasted marketing. At the same time, this will give broadcasters more power of negotiation as this seems to be a good context for them to auction the spots for certain events. Example: a beer producer interested in getting the commercial breaks during a sport event will bet as high as possible to be the only advertiser -- perhaps the way Google sells out ads is quite appropriate.

It seems an interesting idea and I think that if some of the underlying assumptions are worked out, it may become quite lucrative.

A while ago Ryan was mentioning a list of Wharton bloggers (he is a 2nd year MBA student there) and was wondering about the ones from HBS or Stanford. According to MBA League of Bloggers there is only one MBA student blogging from HBS and none from Stanford. If you're interested, you can find here a list with top Harvard blogs.

Also, TJ is mentioning another good one: Andrerib's weblog. This guy is from Portugal and is interested in concepts such as usability or user interfaces. He's got some thoughtful comments too.

No posts today, I just didn't feel like following the news, I still have a very bitter taste about yesterday. And I decided to make this "comment of silence" - inspired from Perdido en Madrid.

Tonight there were millions of people all over Spain manifesting their grief and protest against idiots. You can see some pics here.

Got an email from a friend of mine living in Madrid - she said she was ok, but people are just shocked. It is just horrible. The last update counted 173 dead people and 600 injured. You can read more here (EN), here (EN), here (EN) or here (SP).   

UPDATE 1: I just IM-ed with another friend of mine living in Madrid just 10 minutes away from Atocha, the main railway station. She was shaky and shocked, all she could say everything looked surreal, people were terrified in the streets and sirens were on all day long. There's about 180 dead people and almost 900 wounded, and it doesn't look like an ETA attack considering the perfect timing and the way the bombs were set. ETA didnot even claim it. Most of the fears are that Al Quaeda has something to do with it.

Besides Iberian Notes and A Fistful of Euros mentioned above bloggers from Back Seat Drivers and Secular Blasphemy are also following closely on the event.

UPDATE 2: "The stories you heard, the pictures you see, victims explaining what they have seen...it's all unbelievable. The anguish I feel inside is not going to leave me in a long time. [...] And then you feel very frustrated when you read that CNN don't want to call ETA a terrorism group, they prefer saying that they only are a separist group. The rest of the world have to realize that we have a big problem in Spain and very little solutions."

This is what my Spanish friend wrote me and left me speechless. I am sad, if Arabs are involved then this may be the beginning of more attacks and it is big. I think that this 3/11 represents the most serious terrorist attack against Europeans since WWII. Even though the Spanish officials have no doubts that ETA has the main responsibility there are some evidences indicating the Al Qaeda may have been involved as well. You may also check comments from over Instapundit. Up to date there are 190 dead and 1400 wounded.

UPDATE 3: Edward from A Fistful of Euros has an extensive comment arguing the Al Qaeda involvement scenario.

Another very interesting industry for the investment community. I think it is very similar to the tourism industry I was talking about yesterday. Romania has good wines, again it's just a marketing problem. Last year Romanians exported some 42 mil. litters worth $25 mil. 

On the national side, producers started to understand the marketing importance as there were some campaigns for brand launching and positioning in the industry. However, prices went up a bit in the last years and Romanians seem to have switched to beer. A bottle of decent wine in supermarket costs about $3 while a bottle of beer is about 70 cents.

It seems that after all there's some benefits for Romania for not being in the first wave of the countries joining the EU this year. A Polish juice producer will relocate part of its production facilities to Romania since it is less profitable to export from Poland. By officially joining EU in May, the newly admitted countries will have a common EU duty export tarrifs.

...mainly directed in the energy and railway sectors. Among the big names: Siemens, ABB Germany and Areva.

It is the Polish Enterprise Fund involved in a €20m transaction aimed at the consumer finance and retail industry, though not officialy confirmed. The fund is already involved in Romania by having a minority stake in Orange, but they will probably exit this year since Orange is interested in acquiring the minority stock.

They also confirm that the most likely exit route for an investment in Romania is selling to a strategic investor since IPOs are quite unlikely to be successfull due to the low Stock Exchange liquidity.

Jeff Jarvis writes about decision makers from the advertising industry meeting for discussing the metrics for TV advertising. The advertising rates now are decided by calculating the audience rate a program might have. As such, the model involves a strong correlation between the ads and the TV shows - advertisers look at which programs are best rated and what audience they have. The decision is made by using a proxy - the TV show rating - for targeting a particular interest of a market segment.

An easy example would be a beer producer advertising during a sport event broadcast and assuming that people watching it would be interested in drinking beer. Now, it is evident that not everybody watching sport is beer drinker. Some may be kids, some may have a non alchoholic life, some may enjoy other drinks. Some of them may be beer drinkers but nobody can say for sure how many, the best they can come up with is a guesstimate. The higher the audience rate for that event is the higher the bias of this assumption may get. And this leads to wasted marketing.

In this context, measuring the audience for ads instead of having the program ratings as a reference may prove more useful. It reduces the bias and permits marketers getting what they paid for in terms of audience to their ads. What does this mean? Instead of TV stations creating targeted content for getting targeted advertising - their main revenue stream after all - they should look at the consumers by their interests. Instead of throwing ads at a sport broadcast, the beer company may find a better channel for getting to the beer drinkers community - the exact target - hence getting a better return for their marketing spending. It is all about understanding the behavior of a network of people (beer drinkers in this case) and finding the right channel for communicating the message. And this translates into need-to-have-INFORMATION.

Wasted marketing is a problem and I believe that knowing the consumers well may lead to reducing it. Consequently, info-based organizations are most likely to succeed and this may change a bit the advertising industry configuration. Jarvis puts it best: 

"Advertising will be all about ad hoc networks of people rather than content. [...] You turn your attention from buying content to marketing to consumers, all that changes. [...] So the network is redefined. It's not a network of content. It's a network of people. And really hasn't that always been the holy grail of advertising: It's about us, the consumers, the people."

Jeff Nolan from SAP Ventures has a superb comment on why companies should pay attention to blogs and how they should handle them. There's a little story behind, starting from Jack's challenging the effectiveness of online social networks and arguing that people are tired to get spam messages of joining their social networks from people whom they do not know. As such he picked up Linkedin (which is perhaps the most business-like social network from US), created a fake account and sent out invitations to his more than 1000 contacts. Jeff published the whole story on his blog. After 2-3 weeks the results proved his points, but this is not as important as the fact that the Linkedin's CEO himself contacted Jeff via his blog acknolwedging that they're aware of the problems and they're trying to fix it.

The morale of the story, besides Reid Hoffman's leadership lesson (Linkedin CEO) of the way he treated the whole matter, emphasizes that blogs started to represent a terrific medium for getting valuable feedback from customers in real time as well as communicating the corporate strategy and vision properly.

It involves internet calls without a computer. Unlike devices that require a PC, these simply plug into the broadband Internet connection, using a standard Ethernet cable. That means you either need to locate them next to your broadband router - which can be inconvenient - or use a wireless bridge to position the phone elsewhere in your house. The model involves a monthly fee covering in a segmented way the areas you're interested to call (local/regional worldwide). The big assumption here is of course the broadband access.

It is not new that when you consider a marketing expense you look for the returns as quantified in sales increase. Having this in mind and given the Romanian size and huge touristic potential I was a bit surprised to notice that the Romanian governement allocated only $12 million for it.

It should be noted that tourism is one area where the state budget can hugely benefit in the near future given the bio and geographical diversity and culture one can find nowadays in Romania. If we're to judge the declarations the officials already have realized that. If we're to look at their strategy, I'd say they're far away from having at least an idea about what the tourism investements and consequent returns mean. A simple evidence of that is that the state organization dedicated to dealing with this issue is incorporated into the Minister or Transportation and Construction.

The promotion figure may appear high by Romanian standards, but from the marketing point of view is not big at all. Simply compare it with government promotion budgets in Turkey of $75 mil and in Greece of $150 mil. Many foreign tour operators are just unaware of the Romanian market.

BUT, that means the business opportunities are huge. If interested, you may read a paper about Romanian tourism background and potential (PDF) written in 2003 for CHF - a U.S.-based private, non-profit development corporation. Their conclusion? Romania has several tourist products that are competitive and have the potential for increased exports: namely cultural tourism, spa/health tourism, nature/adventure tourism (including winter sport tourism), spa/health tourism and city tourism. Nevertheless, without a concerted effort in government policy towards the support of tourism including a substantial increase in funding for tourism promotion, this sector is not likely to experience huge amounts of growth.

Rajesh Jain points to a Fast Company article written by Thomas Davenport - "the most influential business guru you've never heard of." Davenport talks about how big business ideas come up and play an important role in the value creation process, and proposes an eight-point game plan for winning with ideas:

Companies compete with their brains as well as their brawn -- "Organizations today must not only outgun and outhustle competitors, they must also outthink them. Companies win with ideas."

Great ideas have three key elements -- "All big ideas share at least one of three business objectives: improved efficiency, greater effectiveness, or innovations in products or processes. In a way, it's an exhaustive set of possibilities. You do things right, you do the right thing, or you do something new."

There are no truly new ideas out there -- "Every big idea owes a considerable debt to related ideas that came before it."

Innovation comes from the front lines, but the top sets the tone

Every new initiative needs a champion -- "All ideas must have passionate advocates behind them--people who understand that business-improvement initiatives are vital to a company's success. These idea practitioners are the critical links between ideas and action."

Sell no idea before its time

The story sells the idea.

All ideas have a life cycle -- "History shows that hot ideas soon cool and fade from the scene."

If you're interested in reading more about new ways of wealth creation within revolutionary companies I recommend Gary Hamel. One of his books - "Leading the Revolution" - is really energizing for entrepreneur wannabes, innovators wanting to make their voice heard or people thinking the company they work for can be more profitable than it is now.

More info about one of the last week's headlines: Hyundai's investment in a new factory located in Slovakia, outside Zilina. (see the FT story here - subscription required unfortunately or you could read more comments over at A Fistful of Euros) Apparently, besides the E700m investment in the factory, Hyundai will invest an additional EUR190m for a car component plant through its sister company Hyundai Mobis. Also, the Slovak state will provide some Sk8.8bn (about E220m) consisting of income tax deduction, contribution to education and investment in the area's infrastructure (construction or repair of roads, etc). So all in all a joint investment of E1.1bn for a factory located on a 200 hectares surface, producing 200,000 cars per year and supposed to be functional by the end of 2006. Nice one!

You can read from here a good overview (PDF) about the EU enlargement in the context of this year's joining of 10 (mostly) Eastern European countries. The paper presents a brief of the accesion process mentioning the benefits, the business opportunities and risks related to the accession. It is a good read for people interested in getting the big picture of Central Eastern Europe and to a larger extent to what EU will mean in economic terms after the enlargement - .5 billion consumers and €10 trillion combined GDP.

Howdy folks, sorry for the absence, I just didn't have anything interesting to share for the last days and didnot want to fake it.

Here is an interesting interview with BRD's Bogdan Baltazar. BRD is the second largest Romanian bank and is owned by the French Societe Generale. Baltazar is its president and one of the most important Romanian bankers. Some insights:

"I don't think consumer loans will boom again [...] The boom last year was due to a repressed demand, since consumer lending hadn't really existed until 2001. This demand started to take off in 2002 and exploded in 2003. I think this boom is now over, and consumer crediting will continue to grow, but at a steady, calmer pace."

It is true that the market has started to mature, especially in Bucharest, I have mentioned that before, but still at the national level the repressed demand Baltazar is mentioning still exists and it will take time to be fulfilled - it's a large country, huh? In this context players in the retail industry announced several large investments in opening new outlets, the most notable being the last month's Media Galaxy opening. (electronics retail). My take is that a good national coverage may decide the market leader.

"Romania's problem is that it doesn't have good quality FDIs due to an unfriendly business climate, while exports of cheap labor and raw materials have reached a high limit, beyond which they can no longer grow."

The FDI (foreign direct investment) started to flow in, I mentioned (here, here and here) that big companies started to pour money into developing their business in Romania. And that is quality investment. I reckon that the cheap labor exports he mentions is lohn manufacturing - raw work for products already designed abroad. Companies especially in the textile industry started to understand the lohn limitations and developed their own product models and even brands - see Brainconf shirt factory from Braila.

Also, he speaks about the business climate is not the best, I think everybody I talked to - be it investor, entrepreneur or manager in Romania - complained about it. The good news is that there's signs of improvement compared with last years conditions.

Finally, he mentions a date for Credit Bureau opening - October 2004. This is a classic Romanian approach for developing a new project VERY slow, to my knowledge the discussions about opening a Credit Bureau started early last year. Its impact will be huge though, a new industry will emerge and this will truly permit credit consumer getting to higher than 25% of bank's loans or higher than 2% of GDP. Money which will fuel the economy.

What would you think if you see the below cities and figures? No, they're not prices for plane tickets...

- NY - $1,730

- Sao Paolo - $1,148

- London - $1,278

- Oslo - $1,322

- Toronto - $1061

- Paris - $1,052

- Budapest - $1,043

- Prague - $1,078

- Warsaw - $1,026

- Sofia - $983

The figures represent the mentioned cities equivalent for a $1000 salary if you'd lived in Bucharest nowadays. I find it rather funny than real though, especially for the Oslo, Paris or London. You may play with the figures by yourself by using this calculator (found via The Glory of Carniola)

You can read here a great story about the VC behavior evolution in time. Cringely is very sharp, read it all, I liked this part best, it sums up an investment philosophy:

"In times of uncertainty [...] don't be Mark Twain ("Put all your eggs in one basket, and watch that basket!" -- it didn't work for him anyway). Instead, bet on serendipity -- don't invest in ONE big idea -- invest in 10 ideas that are your best guesses as to the widest range of possibly big ideas. You don't know but what the heck, NOBODY knows. This gives you ten chances to win, instead of one."

One of the most important drivers of Romanian software industry is the Government support. This support can be provided mainly by creating an adequate business environment - stable and sustainable - and by lobbying the industry's potential abroad.

On the business environment side there's several problems, part of (especially small) software companies monthly strategy is looking for innovative solutions in order to deal with local authorities and with a cumbersome tax system. It is just the way it is, it is not something software-related, it's rather Romania-related. Moreover, the ones that may have a strong influence on the Government representatives and that may actually do something about it - the industry associations - are more divided than ever, being more preoccupied with their sphere on influence than with the software industry problems per se. On the other hand, at the official level, it would be very useful for the industry if the authorities are to spend some funds for promoting Romania and its competitive advantages. The reasons are obvious, I will not insist on them. Do they do it? Not that I heard of.

Why I am bringing up this issue? Because our neighbor, Bulgaria, not only realized it but they're already doing something about it, they are heavily promoting their software competency in the US. And I mean at the official level. Why doesn't Romanian government compare with Bulgaria on this one?

"Blogosphere - a land where the smart get smarter, the connected connect to one another, and the losers go home."  -- part of an article by somobody frustrated with the blogging phenomenon, obviously somebody who just didn't get it. You can also read the answer from Microsoft's Scobleizer.

It is a well known fact that online forms of payment are not very popular in Romania for mainly two reasons: bad security and low internet rate adoption among people. However, sooner or later different business models will emerge with a clear target people interested in online transactions given the inherent risk of using online payment is hedged. Omnipay is part of this category targeting two types of segments: virtual stores (buyers will indirectly use omnipay's services) and people/organizations interested in paying bills via internet. I haven't seen too much advertising on it, even though the system is said to be functional since October last year. The model is clear, the business has sounds benefits should the fundamentals be worked out right. They also claim they will break even at around 250 clients. It should be noted however that having a good technology/business model does not make you a commercial success; it rather creates a context favourable to get successful. I guess Omnipay will have to closely work with their customers for back-to-back marketing for getting end users' awareness.

Eurom Bank may represent the exception to what I was saying yesterday about Romanian companies' culture of not getting listed on the Stock Exchanges and will get listed this year on Rasdaq - the Romanain secondary market. Their representative acknowledges though they're not expecting stock financing this year since "the market is not ready yet".

I was mentioning the other day about the investment management industry that seems to be quite interesting in the appearance context of new class of wealthy Romanians. Besides investments products or real estate they are also looking nowadays for buying boats. It seems that the demand is increasing at double digit rates, in spite of the poor infrastructure. Short reminder for people not familiar with Romania, the boats can be used for both maritime (at The Black Sea) and fluvial purposes (the Danube). I think that a good entrepreneurial opportunity nowadays is investing in the facilities like refuelling stations, docking harbors or electricity supplying stations. That not only would serve the local sailers but also may help a surge in the tourism industry involving international sailing from one country to the other. I know that several Scandinavian friends of mine would certainly be very interested in it.

In UK there is this TV show - Flipside - discussing what people should watch on other TV channels by that time. I think it is quite an interesting one, even though the idea per se was firstly conceived at idea-a-day.com - an online place where one can find several ideas for free. If interested in the idea-website concept you may want to check also whynot, found over at Bubblegeneration.

The most common software business model is the one where the vendor charges a high upfront fee for a licence and then smaller, ongoing payments for maintenance and upgrades It is called perpetual licence model and nowadays it is used by the big producers who dictate the terms of sale, especially because of their high negotiating power.

It seems like software companies increasingly understood that this is not a sustainable model since it is not customer-centric, it is rather product-centric. Consequently they switched to software-as-a-service that seems to be more appropriate to the customers' need, creating a sustainable relationship with the customer. This business model may include subscription-based licensing in which customers make repeat payments to renew their right periodically, linking payments terms to certain project milestones (i.e. programs delivery, results evaluation, etc) or simply paying for pilot projects.

I had a look over the 2003 report from the Romanian Stock Exchange (BVB). There are a couple of notes I made:

- in the 1999-2003 period the number of listed companies halved (from 127 to 62)

- in the same period of time, the transaction value increased by 250% (from $125mn to $307mn) while the market value of the listed companies increased from $316mn to $3.7bn!!

- the number of brokerage and investments houses affiliated with BVB decreased in the same time range from 150 to 73.

- 84% of the listed companies had initial equity value of less than ROL 8bn (about $250k)

It also should be noted that several of the companies listed as a result of privatization back in the first part of the last decade got delisted due mainly to poor financial performance. Also it seems that the market trend is on an increasing level, even though it originated less from outside investments and more from increasing stock prices. At the same time, most of the transactions made by the foreign investors were US-based (some 35%) people with a strong investing culture in the stock exchange. The investment companies number may have declined because of the lack of attractive stocks in that period combined with the SNI/SAFI scandals (investment funds that went bankrupt at the end of 90s) which affected investors confidence.

In the short term there will be probably more gains given the increasing trend in the quotes; nevertheless I doubt that in the future we will see spectacular investments in BVB, mainly for (i) lack of liquidity from the market, as foreign investors will still look fro SMEs - a sector that is rather underinvested in Romania at present; (ii) the lack of IPO exit culture of Romanain SMEs and (iii) the deregulation from last year permitting Romanain investment houses to invest abroad. Perhaps a solution for BVB would be looking up for some regional partnerships - alliances or even a merger.

I found a new blog written by a Romanian. Looks interesting.

Over at Motley Fool there is a very easy reading about how the market growth is not a zero sum thing, rather it is translated into value creation.

I just finished filling up my bloglines account with my periodical readings from the web. What is it and what it means?

Bloglines is a news aggregator or a feed reader that is just like an email account inbox gathering news/blogs headlines or posts from websites from all over the world. It does that with RSS feeds - a way for people who publish content online to notify people interested in that content whenever fresh content is made available online. Basically it is a piece of code (an XML file) from the script of any website that contains information about the newly published content. Web publishers keep this piece of code handy for people interested to have it when in need (you can find mine on the right column under @rgumente)

So what is the beauty of it? Firstly, you get to personalize your periodic readings. Instead of browsing through each website (go to favorites, click on it, waiting for the page to download) you just have it in one place easy to read/scan. And believe me, when you get to read from more than 150 web sources every day it becomes very tiring just doing that. Secondly, they are updated whenever you want, be it every hour, every day or every week. Thirdly, you get personalized info, without receiving spam. You just choose whatever news feed you would like and you're done. Consequently a news reader has at least three characteristics: easiness, customization and time efficiency. All this by using the RSS feeds.

What is the impact of RSS feeds? I think it will be huge, especially on the corporate level. I was mentioning before that I believe blogs will make an impact on the corporate level. They simply help firms to keep very close to their customers, suppliers, shareholders, in one word to the stakeholders. And balancing stakeholders needs and close communication with them is one of the most important item on the corporations agenda for staying competitive. Well, with RSS feeds you may just as well do that: one may be very easily informed about the latest product release of a company, or about a  job opening, or simply about a PR event. Moreover, in time, fancy corporation websites used mainly for presentation will be replaced by online places containing an "About us" section and an updated blog. As such they will become a more efficient communication tool. Why is that? Because the increased competition will force you to be more transparent and close to understanding your customers needs, your employees problems or the latest industry trends or practices.

For the last past weeks there's been several events on the Romanian political arena that put several questions on the credibility about what is happening in the country at the governmental level. While I tried to avoid making comments on what is going on (it is not the purpose of this blog) here is in short some of facts: the minister of justice scandals with corruption accusations, apparently with clear evidence, the 450 km highway construction across the country awarded to American Bechtel all of a sudden and without a legally-required tender, the kids adoption scandals. These reflected quite badly on the international level both on the EU and on the foreign investors community. Actually, it is so bad that the Romanian PM had to go himself to Bruxelles for presenting an official point of view. Moreover, investment banks such as Bear Stearns just downgraded their positive outlook on Romania to a negative one. To be exact, they say that "we moved to a negative outlook on Romania a couple of weeks ago on the back of a lot of negative news flow''. Perhaps this has nothing to do with Bear Stearns financing part of the Bechtel deal. 

Great advice when it comes to cold calling a CIO, and to higher extent in most cases where sales people may need to use cold calling. My take is that everything reduces to preparing in advance your homework in terms of knowing everything about the company and the person you call. Don't assume anything and don't get annoying. Everybody in sales should read this.

I haven't seen too much news coverage on this event which took place last Friday, rather just some short notices identical to the press release of the Presidency. Softwin got 3 awards (best software product, best national project and best educational product). Radu Georgescu was named the personality of 2003 and myBanking (developed by Mobifon with/for Raiffeisein Bank) was declared the most innovative one. Finally, BCR (largest Romanian bank) got the most significant Romanian IT&C client award - whatever that means. Perhaps the biggest spender. You can see the full list of the nominees and the winners here.

This is the title of a Crisis Paper by SAR (Romanian Academic Society) conceived as a result of  the recent scandals the Romanian government was involved in and which certainly affected the investors community perceptions about the Romanian business environment. The paper represents a set of concrete actions that can be carried out by June this year, with minimal financial costs, in order to regain the domestic and international credibility of the government. Most of them are suggestions about the justice system as well as about the supposedly influence and manipulation of the authorities upon the national TV station. I think it is a good initiative showing that the civil society is not sleeping; yet it will have a minimal effect. My take is the government is going to take action and change some things anyway, the situation appears to be more complex than they're admitting.

The state-owned Romania 3 radio is forced to change its frequency due to the entire "Eastern band" having been allocated to NATO. This move means investing in new equipment and while they need to spend quite a bit for revamping their technology they seem to choose quite an innovative solution (for Romania of course) of broadcasting online ONLY. It will be interesting to notice if Romania 3 audience (which is quite loyal) would migrate after them. That would be a good start for Romanians changing their habits of following the news sources mainly from TVs or newspapers.

While I was saying the other day that the budget airlines will start considering the Romanian market soon, it seems like they have already started to look more closely into the Hungarian one.

Quick review of some of the 2003 macroeconomic figures - you may also be interested in the piece of news about it.

GDP: EUR 49bn       GDP increase 2003: 4.9%         (GDP incr. 2002: 4.9%; in 2001: 5.3%)

net FDI: EUR1.3bn     external borrowing: EUR1.6bn      

FX reserves: EUR1bn   portfolio inflows: EUR0.5bn

Current account defficit: EUR2.92bn (from EUR1.62bn in 2002) - about 6% from GDP

The main drivers were building, services and industrial gross value summing up to almost 80% from the 2003's GDP. The imports increased by 16.3% and exports went up by 11.1%

Ross Mayfield has a great post about what it takes nowadays to venture in a start-up. In addition to his comments I would mention that one has to be patient, stubborn and perseverent. The entrepreneur has to be agile and flexible in terms of admitting and correcting errors quickly, patient about seeing the results of the strategy, and perseverent in pursuing the goals. An entrepreneur has tough decisions to make, and not only has to decide but also to execute well. Basically, most of the time it is an exercise of making decisions throughout all challenges and opportunities. It can be very rewarding - you create value, but also very risky - especially in the beginning, when the resource management is critical, and very enjoyable - you are in the position of seeding the organizational culture and choosing the guys you work with.

The latest buzz of the big companies' attention to the Romanian market is completed by the today's news of Intel being interested in exploring the local market potential. Intel says it will not make a greenfield investment, they're rather interested in spotting new technologies or smart start-ups. Actually they have a clear strategy, they are aware of the potential and consequently they screen the market through their venture-capital arm, Intel Capital, which is increasingly being used to seed outfits that help create a cottage industry around a new Intel product.

You can also read in Business Week more about Intel's future plans and strategies, in the context of Craig Barrett (one of the two founders) handing over his CEO position to Paul Otellini in 2005. Short reminder, Craig Barrett and Andy Grove are Intel's founders and the same persons who decided back in 1984 to quit the then-profitable RAM production facing the Japanese cost efficiency threat and venturing into the chip industry. That move is a case study in any strategy class. Also, Andy Grove is the one deciding on segmenting the chip market after being said to have called prof. Clayton Christensen from HBS in the middle of the night for more comments from his book (The Innovator's Dilemma). And this is how Celeron was given birth. Presently Andy Grove is Intel's chairman.