Thursday, March 31, 2011
In the late sixties, I managed a mobile telephone company In Corpus Christi, Texas. Back then, mobile telephones were far too large to be carried on your person. They were acquired through a lease agreement, weighed in excess of thirty pounds, were stored in the trunk of your automobile or mounted behind the seat of your pickup truck. There was a control panel that mounted under your dash, a switch to turn it on and off, a volume control, and a hand-held push-to-talk microphone to summon an operator working at an answering service. She would accept a request to dial a number for you and connect you to your party. If someone wanted to call you, they would call the answering service and asked the operator to contact you and ‘hook you up’.
Very few individuals could afford such an extravagance. Most of our customers were large companies who installed these mobile telephones in cars and trucks to keep in contact with their employees. When you received a call, either a buzzer would go off on the control panel, or if you were out of your vehicle, your car horn would blow three times and you would run back to your car to answer your phone. Pagers became common place, but even then, the magnetism of instant connectivity was calling.
In 1961, I designed my own car alarm system and repaired Airborne Navigation Radar systems for the USAF. In 1977, I taught myself computer programming, built computers in my basement and sold them to businesses… many only wanted to impress their customers, employees and peers. I had been a ham radio operator since childhood, and today, I carry the call sign, K5IBM.
My first cell phone was a ‘bag phone’ I carried slung over my shoulder like a purse, and today I own a Motorola Bravo with an Android operating system. I can instantly change the price on a pack of cigarettes in a convenience store on the other side of the world while driving down I-20 in West Texas, along the Delta in East Mississippi, or drinking coffee in an airport terminal in Denver, Colorado. I have always marveled at how long it takes the rest of the world to catch up, and how quickly it does when the time is right. Mobility has always been a part of my life. I’m a geek, and I admit it. I have always teetered on the “bleeding edge of technology,” and bear the scars and bruises to prove it. Over my lifetime, I have watched things that were once considered an extravagance, become an absolute necessity for normal existence.
WikiPedia tells us in 2010, 73% of the world’s population carried a cell phone – five billion and one to be exact. 91% of Americans have them, and there are more cell phones in Russia, Brazil, Germany, Italy, the United Kingdom, the Ukraine, Spain, Argentina, Poland, Taiwan, Romania, The Netherlands, Australia, Saudi Arabia, Chile, Portugal, Hong Kong, Belgium, Hungary, Bulgaria, Israel, Denmark, Jordan, New Zealand, Estonia, Lithuania and Montenegro than there are people.
Even though Internet penetration was limited, Facebook, Twitter and other online media have driven the revolution of social unrest in Egypt, Bahrain, Tunisia, and other countries in the Middle East. ‘Mobility’ leads to ‘connectivity’, and connectivity is our goal. Ultimately, connectivity will lead to a singularity, a central hub for everything. Eventually, billions upon billions of cell phones, computers and networks will come together – one, large, virtualized data processing environment, governed by gatekeepers who will maintain partitions, firewalls and the security to protect our vital secrets. Cloud computing is the facilitator of this unavoidable connectivity through the integration of one individual with another, one society with another, and one business with another. Anticipating an accelerated move to this new environment, how will your business look tomorrow, next week, next year… a decade from now? Do you have plans to lead, follow or just get out of the way?
Wednesday, March 30, 2011
Regardless of the pros and cons we hear about cloud computing, the advantage of having the flexibility to collaborate with trading partners and service companies in real-time, solves so many problems, anything bad you might say about it pales in comparison. It’s as simple as comparing writing letters back and forth with working in the same cubicle with our desks shoved up against each other. Following close behind collaboration, are immediate software fixes, unlimited storage, infinite expansion, convenient access, and much, much lower costs.
In our book, “Turning Convenience Stores Into Cash Generating Monsters,” Jim and I discuss the ability to experiment, and why it’s become a lost art in retail. You should already know a little about experimentation. Your suppliers are using your stores (at your expense) to test the viability of new products right this very minute. I often wonder how much of a store’s profits are lost because some manufacturer wanted to know if a new line of peanuts or a new flavor of beef jerky would catch on in your market.
Experimentation in stores can be good, but it can also be very bad. The whole idea of experimentation is to monitor something to watch its performance. At the supplier level, they are only interested in how many new items they can put in your stores. They could care less whether it cost you money or makes you money. Experimental products often sit on stores’ shelves for years before someone throws them out. The funny thing is, you paid for those products out of your profits. It cost the manufacturer nothing – thank you very much.
The entire culture of merchandising has been designed to make your supplier’s wealthy. Take the cigarette category for example. How many packs of dead cigarettes do you allow in your stores to get a deal on contracts? The money lost to new, unproven products is to say the least, enormous. General Mills alone introduced 300 new products in 2009. That’s twenty-five new products each and every week. Coca Cola lists twenty-nine products that start with the letter ‘A’, and forty-one that start with ‘B’. In fact, the only two letters of the alphabet they’ve missed so far are ‘X’ and ‘Z’.
Hidden within categories are, on average, approximately 2,000 products that are not making you money, and the other 900 or so are carrying the load for the whole store. That’s around $42,000 (at cost) of non-profit producing or marginal stock. One-hundred stores? $4.2 million. 70% of each store needs help. 300 to 400 products are simply dead. They would make you more money if they were buried in your back yard, because they are occupying space where profitable items could be placed.
When did this start? It’s always been this way. It’s just getting worse, much worse. That’s why we see so many stores in bankruptcy. That’s why we now see 73% of the market owned by operators with ten stores or less. That’s why I found an Indian guy sleeping on the floor of a store while his wife ran the cash register. I can promise you that fellow knows exactly what’s in his store and how much money each item is making him, because he pays attention to his stock. He buys only what he needs, and only what will sell at a profit. He’s not smarter than we are, he’s just hungrier.
We native-born Americans have become somewhat lazy in our ways. We allow others, who we trust, to make our decisions for us, and they have learned how to take advantage of that inherent weakness. Properly integrating our stores into common networks, making our suppliers become partners in the selling process, and increasing customer satisfaction, is why cloud computing is taking off – Google ‘Cloud Computing’ today and you’ll get 35.3 million hits, and the number is growing. The smart guys saw what it did for Walmart. Now, you should learn what it will do for you.
Tuesday, March 29, 2011
I’d like to dig a little deeper into the ‘flexibility’ issue regarding cloud computing as it best supports small business’ ability to change rapidly in the face of overwhelming odds. Business practices are not keeping up with technological changes as they are occurring at an ever-increasing pace. A ‘wait and see’ attitude is no longer excusable and may result in abject failure.
We are not lawyers or politicians, and most of us don’t have in-house CPAs to keep us from getting hammered by laws and changes in accounting rules that affect everything we do. Ignorance is no excuse, and that kind of indictment against small businesses is unfair. I talked to a client today that is facing horrendous fines and penalties, because they didn’t know they were breaking a federal law regarding a payroll issue. There are so many of those laws. Our government expects us to know everything, and if the truth be known, all of us are most likely breaking laws at this very minute and we are unaware of it.
During the Irish potato famine in the mid-19th Century, the Irish population starved because the British government exported most of their edible food to feed the people of England. Our own government is in the process of doing the same by taking our profits to run a bloated bureaucracy. This bureaucracy is turning over every rock, exposing every little mistake to procure every penny they can find, while adding enormous penalties and crippling taxes to increase their funds. Most of us cannot afford to go it alone, but then, we can’t afford not to either.
The Internet has given us the flexibility to collaborate with others like never before. It is only natural for us to expect this to extend beyond social networks.
Here’s one example: Small retailers do not have the resources to manage their company’s inventory properly. By the same token, it can’t simply be ignored. If you sell goods to consumers, the movement of those goods is the life’s blood of your organization. So, retailers have embraced whatever programs available to try to control their stock.
Today, all but a few of our customers have migrated to the cloud. Because of the flexibility to collaborate with others, we can perform many of the mundane tasks for our customers that were unheard of when we sold computers and software and provided telephone support. Being on-line with our clients, we have become a very important part of their day-to-day operations. Just today, I received a phone call from a client who wanted to know who entered a certain transaction on February 15. I was able to give them an answer in less than a minute. The cost for this service was nothing, as they make one small monthly payment for all of our services combined. Before that, I was asked by another to reproduce a paycheck from 2007.
Doing these kinds of things on a day-to-day basis has caused us to rethink our role within our customers’ organizations. Our computer can monitor the sales of thousands of products in as many stores. We can tell our clients when they’re out, when an item is sold below cost, when its turn rates are waning, when it’s dead, etc. Millions of little jobs, heretofore impossible due to the human costs necessary to perform these operations, became second nature when our large data center got involved.
Monday, March 28, 2011
A simple definition of Cloud Computing goes something like this: Cloud Computing provides for a remote service that users can access over the Internet.
Simple as it is, that short definition is far too broad to tell us what we need to know. If you leave it at that, you might as well say: Cloud Computing began in 1969 with the creation of the Internet.
That may be a true statement as well, but it tells us nothing about how we can benefit from it. It reminds me of a time back in 1987, when a client asked one of my salesmen to tell him how a computer works, and he replied, “Real good, and that’s all you need to know.”
Mike Stevens at ‘IT Business Edge and Hosting.com’ wrote: “Cloud Computing is an extension of a company’s existing infrastructure with enterprise-class features like redundancy, high availability and disaster recovery, provided at a substantially lower cost than on-site approaches.’” WOW! That’s also a true statement, but honestly, I didn’t want to know how to build a watch. I simply wanted the time of day.
So let’s drop definitions and move on to ‘reasons’. The most compelling reason to explore Cloud Computing is that it gets you out of ‘IT Jail’. For decades now, you have been locked inside an inflexible environment that dictates how you have to run your business. The orders and rules come from your own IT staff, or from a company that proclaims they know how everybody’s business ought to be run. Maybe this was good enough in the eighties, maybe even during the nineties; but if the past decade has taught us anything, it should have proven the need for us to start running our own show. Cloud computing is the best solution to put you back into the driver’s seat.
According to the ‘Cloud Computing Journal’, 51% of Internet users, who have done a cloud computing activity, say the major reasons are convenience, flexibility, and ease of deployment. 41% of cloud users say the major reason they use these applications in a cloud computing environment is because of the ability to access data from any computer or remote location. 39% cite the ease of sharing information as the top reason to use a SaaS (Software As A Service) application. 63% involved with any kind of application in the cloud, expect superior customer service and performance, and would quickly switch to another provider if they felt the level of service was not up to par.” All of these statements add up to increased ‘flexibility’.
As we move away from the on-site approach to a shared environment with greater flexibility, we are going to make mistakes. The costs of making mistakes in a cloud environment are substantially less than those where a heavy up-front investment has been made. The convenience to pay for only the services you use, and for only the period of time you are satisfied, cannot be overstated. It’s also a tremendous incentive for the provider of those services to perform in a way which will insure your satisfaction. You have a powerful weapon to hold over your cloud provider… unless you do something foolish like sign an open-ended long –term agreement.
We let our customers play with it for a month before they make the decision to commit to anything, and after they agree it is the right solution from them, then and only then do they start to pay for the service. For a provider to be able to do this, either they have to be awfully sure of themselves, or they have to get their installation cost down to nothing. That’s where cloud computing really shines.
Sunday, March 27, 2011
Cloud Computing isn’t just about putting everything you have on the Internet. Having your data and programs integrated at one secure, remote site, allowing trading partners operating on the same computer to integrate their data and processes with yours is the payoff. Since transactions are occurring in real-time, it provides a common thread - running through manufactures, your suppliers, you and your consumers who acquire inventory through your retail locations. This is an enormous advantage because it eliminates the disparity between systems and allows trading partners to operate as one, cohesive unit.
As long as the wall of disparity exists between you and your suppliers, you will never be able to accomplish this. Cloud Computing is the major step toward operating your business in ‘real-time’. We understand how never having the ability to do that makes it difficult to envision how it will work.
When a customer buys an item in your store, the sale of that single item has an immediate impact on your store AND the company that is providing you with your inventory. If the data regarding that sale is shared with your supplier, one of your supplier’s advantages is their ability to forecasts future needs, and this in turn insures your customers will always find the products they need at the precise time they are ready-to-buy. But that’s not all. By helping your suppliers reduce their costs, it makes it possible for them to sell to you at deeper discounts. Walmart figured this out in 1986 when they launched Retail Link and that’s the major reason why they can sell some products cheaper than you can buy them.
Now it’s easy to say, ‘Well that’s Walmart. They have this big company and all those stores and all. I could never hope to compete with Walmart.’ Well, you’re doing it now, aren’t you? Every time your customer buys something in your store, he or she is not getting it from Walmart, are they?
However, Walmart’s recently reported ‘out-of-stocks’ proves there is a flaw in Retail Link. It also creates an opportunity for you to do better. This is precisely how smaller competitors gain strategic advantages over larger competitors. This window of opportunity will only be available for a short time, and if you want to take advantage of it you have to move quickly.
You and Walmart are already in a business relationship to provide products to common customers. My wife loves Diet Sunkist Orange. Walmart is out of it half the time she goes there. She remedied her problem by purchasing twice the amount she needs when it’s available. I have often wondered how many sales Walmart misses when they are out of stock.
A recent survey showed that consumers are moving more into a ‘just-in-time’ mode, preferring to buy just what they need for the short term. Could this be another reason why Walmart’s sales are down in the United States? You bet it is. And who are the benefactors? The smaller retailers who are geared more toward convenience item sales. When consumers buy less from Walmart, they are buying more from somebody else, and if they are buying more from you, you should be doing something to insure they’ll become repeat customers.