Applying lessons from history in strategic planning

Please pop along and read my guest post The Five Generations of Online Retail Financial Services, on the Nutmeg Blog, which charts the history of the retail financial services sector on the Web.

It is useful to understand the history of your industry for three reasons:

1. One of the main reasons for studying history in general is, of course, in order to avoid repeating the  mistakes of the past. In the words of George Santayana "Those who cannot remember the past are condemned to repeat it."
2. If you have a sound understanding of the history of your industry, this may help to prevent you from resting on your laurels. Is your SWOT really up to date, or are you making decisions based on strengths which were relevant a decade ago but are no longer so?
3. And finally, if you understand where your industry has been and is going, you will be in a better position to identify current events as a continuation of existing trends or as a break from convention which may signal the emergence of a new trend. This may help you to spot new trends more quickly.

eCommerce Business Models

I was recently pleasantly surprised to receive an email inquiry about a paper I had written and presented at a conference in late 2000 called:

e-Commerce Business Models - Business Models that have Succeeded and Business Models that have Failed - International Case Studies

I realised that the paper was no longer available on the Internet, and so I have now republished it (just follow the link above).

There has been a lot of change in the intervening 11 years. Much of what is covered in the paper is now taken for granted. In addition, at the time of writing, the idea of Web 2.0 (or beyond) was not yet understood, and certainly social media was an unknown concept. However, there is still a lot in the analysis that is as true today as it was then.

I would love to hear any feedback from anyone who reads it now. Who knows, perhaps its time to revisit and update the subject?

More data usually beats better algorithms

Every so often I read something which subtly changes my perspective in a  fundamental way. Anand Rajaraman's post More data usually beats better algorithms is one such piece.

It contains two simple ideas:

Firstly, the main thesis is that adding new data to an analysis often beats coming up with a more clever algorythm. He suggests, for example, that by including which pages link to which other pages as additional data, Google was able to beat previous web search algorithms which focused exclusively on the words on the pages themselves.

Secondly, the related 'Rule of Representation' which says that you should 'Fold knowledge into data, so program logic can be stupid and robust.' This second idea is actually presented by someone writing a comment to the original blog entry, but it is still quite pertinent. Although this particular rule comes from the computer programming field, I think it has more general application.

I read this as I was starting to formulate my conclusions on a review I was doing of a client's strategy. Perhaps it struck a chord because the crux of my review had been to use some additional data about the market which had not been considered by the original authors of the strategy I was reviewing, and which led me to some different insights which had not yet been considered. And perhaps it struck a chord because I had been unable, within the confines of the assignment, to find some additional data which I feel would have further significantly enhanced the review.

Of course, it matters greatly what data you add to the analysis. To add value, the additional data must provide a different perspective and/or be from a different source than the data already included. This suggests that perhaps a key skill for the strategist is having a keen sense of what market data is available and where to source it, rather than simply relying on the data that is immediately to hand. (Oftentimes the data to hand relates to the organisation's own operations and performance, and the data that is more crucially missing relates to the competitive environment.)

And finally, I believe that somewhere towards the end of the strategic thinking process you have to look beyond the data and apply a little creative intuition. That is driven by your experience - the sum of data you've collected along the way but which you cannot tabulate in a spreadsheet. In the final analysis, it is that data that may be the most important addition, creating the distinction between also-ran me-too strategies and analysis, and truly differentiated and competitive strategies and analysis.

UK direct to consumer online financial planning tools

2011 was the year that direct to consumer online financial planning applications finally arrived in the UK, with a number of new products being launched. Here is a roundup of some of the players now occupying this space.

Money Advice Service: The logical place to start is with the government's own Money Advice Service. I've previously reviewed it here. Whilst it does provide a wealth of useful information, the actual financial planning tools are too simplistic to be of much use. It is paid for by an industry levy and free to users.

lovemoney offers a wealth of general financial information plus a Yodlee-based account aggregation and budgeting tool to help you track your spending. It also offers product comparison across a range of categories. It is free to users, from theidol.com (who presumably make a profit on products purchased through the comparison tools).

rplan offers access to discounted investment products on both new purchases or on agency transfers of existing products. For new purchases, rplan offers pre-selected portfolios or helps you choose from between 1,500 funds from a range of providers. A simple capital growth projection helps you plan to achieve a target capital amount and to stay on track. Investment values are updated in realtime. rplan charges no upfront commission and rebates 50% of trail commission (retaining the other 50% for itself).

nutmeg will offer discounted access to funds with a range of investment management tools, including auto-rebalancing, goal targeting and realtime valuations. However, it has not yet launched.

Planwise is the direct to consumer offering from Friends Life, offering a financial health check, pension profiler, savings calculator and risk assessment, all with access to telephone-based advisers. (Not to be confused by the recently launched US financial planning application with the same name). You will note from my previous review of this service that I've not actually been able to access it myself, and that I suspect it is mainly a play to recapture trail commissions.

AllMyPlans is another account aggregator with contract inquiry capabilities, which also offers a data vault for all your policy paperwork. All my plans reminds you of important dates in your plan and best deals at renewal time, and allows you to share your plans with someone else. It is paid for by insurance companies, with AllMyPlans becoming the servicing agent and picking up any trail commission on policies you register with it.

MoneyVista is probably the most comprehensive planning tool, covering retirement and other goals, protection (in the event of illness or death) and organisational tasks such as asset allocation. It provides alerts at important moments in your plan, and while it offers some product comparison tools, you can't actually buy anything through the site. MoneyVista is the only application listed here which charges users an explicit fee to use it after an initial free trial.

CoffeeBreakFinance provides simple tools for creating a budget and tracking actual expenditure relative to it, working out how much tax you could and should be paying, and helping you work out how much home contents insurance you need and maintaining the records you might need to support a claim. It is free to use.

MoneyOnToast.com is the most recent player to enter this market. It is free to use and allows you to get quotes for, buy and trade products from the whole of the market across a number of different product types. It also a single place to organise and keep track of all of your financial information, and a range of interactive tools guides and planners. Finally they offer remote advice from fully qualified independent advisers for £35 and hour.  [Updated 24.2.2012]

2012 promises to be another exiting year in the space. What will be particularly interesting is to see how those sites which make their money from initial and/or trail commission will respond to the Retail Distribution Review (RDR). I expect we will see a few new entrants, as well as a few exits from the market.

Disclosure: I've been involved in the development of both MoneyVista and CoffeeBreakFinance.

Strategic Focus

Scott Adams nails it again in today's Dilbert comic. Strategy is a process of deciding what you are, as well as what you are not going to do. It involves making tough choices based on real insight into the challenges and opportunities you face.

All too often I see organisations not reaching that level of understanding, and so not making those tough choices. As a result, they take a shot gun approach giving their strategy as wide a spread as possible. The result is a strategy that lacks focus. Staff are then unable to discern any real strategic intent, and quickly realise that their pet projects, and whatever else they were already doing, find a comfortable home in the strategy. Meaningful change is not achieved.



A strategy should result in a small number of focus points. Cognitive psychology tells us that people can only remember between 5 and 9 things anyway, but in my experience 4 or 5 focus points is probably more than enough if you want people to remember and act on them.

Content is king, but what content is winning?

Since the invention of the alphabet, the printing press and more latterly the internet and the web 2.0 it supports, technology has enabled people to record and broadcast information with incredible effectiveness and efficiency.

The Leveson inquiry has shone a spotlight on the current state of journalism, and some interesting and worrying statistics have come to light. For example, Peter Preston reports in the Guardian that the tabloid papers the Mail, Mirror, Express, Star and Sun have a total of 19,272,000 readers each day, with the Sun enjoying 7,652,000 alone. Meanwhile, the more respectable publications fare much worse: the Daily Telegraph gets 1,584,000 readers, the Times 1,435,000, the Guardian 1,119,000, the Independent 451,000,  and the Financial Times only 325,000. The weekly Economist boasts only 597,000 UK readers. Turning back to the celeb and gossip magazines, we find that OK! boasts 2,110,000 readers, Hello! 1,557,000 (is it that exclamation marks attract readers?), Heat 1,487,000, Closer 1,623,000, and Chat 1,192,000 readers.

It seems that trash sells, and news doesn't. Is it any wonder, then, that editors push their journalists to dig it up wherever they can?

There was a time Paul Adams tells us that people believed that digital communications would rid the world of gossip and rumour-mongering as everyone would be able to have near real-time access to the facts. It seems that far from that, it is almost the reverse that is happening. Perhaps most people are simply not that interested in real news after all.

The world is moving online, and with it, commerce. And online, they say, content is king. Exactly what kind of content will it take to attract customers? Perhaps there are some depressing clues in the statistics above.

The 3 Worst Kinds of Strategies

I encounter many strategies in my day to day work. Some of the are brilliant, of course. Others less so. The worst of them tend to fall into three categories:

1. Waiting for the environment to improve. It is easy to blame environmental factors for your lack of success. And it is a short jump from there to concluding that if you just wait for the environment to improve then everything will be OK. But the truth is, the environment (regulations, economy, etc.) are more likely to continue to become more complicated, and therefore difficult, than they are to suddenly get better.
   
   Your strategy should be robust across a range of environmental conditions. Preferably, your strategy should even shape environment conditions. But you strategy should not be to wait passively. Strategy is an active process. And even if the environment does improve, all ships rise with a rising tide, so your competitors are likely to benefit just as much as you are - even more so if they have adopted a more proactive strategy.
   
2. Hoping your competitors will falter. Ever business should be in tune with its competitors strengths and weaknesses, and ready to exploit any weaknesses it finds. But simply waiting for them to make a mistake is too passive. As noted above, strategy needs to be an active process, not a passive process.
   
   Hoping your competitors will falter lays yourself open to three risks. Firstly: what if they don't falter? What if they do actually have competent staff who are able to respond to the challenges you thought you had spotted but they would miss. Secondly, your competitors are not sitting idly by - they are hungrily eyeing your lunch. While you are waiting to see if any crumbs fall from their table, they may be planning a direct assault on your business. Thirdly, how do you know you're not going to make a mistake before they do? Can you be that convinced of your superior insight and ability to execute? If you genuinely had that superior insight, how come your competitors are still in business? No, you can't sit by and wait for someone else to make a mistake. You must go out there and grab the market share and competitive position you can for yourself.
   
3. Listening to your customers. Don't get me wrong:- listening to your customers is essential. Every business should do it. And you should take what you learn from your customers into account when formulating your strategy. But listening to your customers is not a strategy in itself. Customers want to be led. The are drawn to business with products and services  that solve their problems and exceed their expectations. They are looking for answers.
   
   Yes, customers may be willing to participate in crowd-sourcing from time to time. But they don't want to be your R&D department. They are looking for someone else - you - to apply the creativity and engineering. Oftentimes, customers don't even know what they want until they see it. If your strategy is simply to listen to your customers and respond to them, you will always be behind their expectations. And sooner or later, some competitor will come out with the product or service that your customers never knew they wanted. And that is where they will go.

Does your strategy suffer from any of these shortcomings? Perhaps it's time you called for some independent assistance.