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The next big boom in the online world

A fascinating picture is beginning to emerge of the trends in Internet growth, electronic banking and e-commerce.  Today I pull together the threads of various research projects.

The first decade of democracy in South Africa has, by pure coincidence, gone hand in hand with the first decade of public Internet access in this country.

What was first a hobby for this writer, counting the number of people going online each year, has inevitably turned into a serious research business, as the 25 000 people with dial-up Internet access in 1994 turned into an overall market of more than 3 million users by 2004.

Today, the Internet pervades our lives, and in the business world has become more or less seamlessly integrated into the background of general business communications and activity. Among the public, however, it remains an expensive option that has to be justified on a budgetary basis – where it can be afforded in the first place – and looms large in the individual consciousness.

Today, the Internet pervades our lives, and in the business world has become more or less seamlessly integrated into the background of general business communications and activity. Among the public, however, it remains an expensive option that has to be justified on a budgetary basis – where it can be afforded in the first place – and looms large in the individual consciousness.Any additional costs associated with Internet use therefore becomes a decision based on experience, trust, and perceptions of improved convenience, efficiency and cost-effectivness. That is no less than five broad factors that will influence the uptake of the likes of online banking, online retail, and using the Internet as a commercial channel for individuals.

A core mistake made by many online retailers and other operators is to assume that all users arrive on the Internet ready to engage in all forms of activity. They then peg their market size at, say, 3.3-million, and then express shock at just how low the uptake of their particular offering might be.

A core mistake made by many online retailers and other operators is to assume that all users arrive on the Internet ready to engage in all forms of activity. They then peg their market size at, say, 3.3-million, and then express shock at just how low the uptake of their particular offering might be.The truth is, those 3.3-million people do not represent a current target market.

In putting together the findings from three of our surveys, namely Internet Access in SA, Online Banking in SA, and Online Retail in SA, we’ve come up with a few surprising conclusions about one of the market dynamics for e-commerce among the public. That dynamic is the level of experience of the Internet user.

In putting together the findings from three of our surveys, namely Internet Access in SA, Online Banking in SA, and Online Retail in SA, we’ve come up with a few surprising conclusions about one of the market dynamics for e-commerce among the public. That dynamic is the level of experience of the Internet user.Bear in mind that the Internet user statistics we compile are based on an industry-wide survey, examining the number of people with access, rather than on the more common media studies, which are concerned with the use of the Internet as a media tool, and thus examine usage over, say, the past week or month.

In industry terms, the level of Internet experience is based on length of time with access, rather than the intensity of access. And here is where a fascinating picture emerges. Rather than look at how many people have access to the Internet today, we looked at how many people had access five years ago. That figure would then equate to the number of people with five years experience at the end of 2003. The figure for 1998 was 1.2-million people with Internet access, meaning that at the end of last year 1.2-million people in South Africa had five years experience on the Internet. It is therefore not a great coincidence that the number of online bank accounts in South Africa came close to that amount, namely 1.06-million. However, that number represents probably around 800 000 individual users of online banking. Given that it is unlikely 100% of a target market will take up any service or product, it is a remarkable achievement of South African banks that they have achieved an uptake that is equivalent to about 80% of the experienced user base.

In industry terms, the level of Internet experience is based on length of time with access, rather than the intensity of access. And here is where a fascinating picture emerges. Rather than look at how many people have access to the Internet today, we looked at how many people had access five years ago. That figure would then equate to the number of people with five years experience at the end of 2003. The figure for 1998 was 1.2-million people with Internet access, meaning that at the end of last year 1.2-million people in South Africa had five years experience on the Internet. It is therefore not a great coincidence that the number of online bank accounts in South Africa came close to that amount, namely 1.06-million. However, that number represents probably around 800 000 individual users of online banking. Given that it is unlikely 100% of a target market will take up any service or product, it is a remarkable achievement of South African banks that they have achieved an uptake that is equivalent to about 80% of the experienced user base.Given these numbers, we can begin to see a close correlation between online access and online banking – as long as we focus on experienced users rather than all users. The banks’ projections for 32% growth in online banking in 2004 suddenly does not sound like dot.com-era hype: the growth in number of Internet users with 5-years experience this year will be no less than 44%.

The next question is what this means for spending online. Firstly, only about half of online banking users also transact within the online banking environment (i.e. not only accessing account information). Using a similar proportional basis, of these 400 000 or so individuals who have gained enough trust in online banking to transact on a banking site, it must be assumed that around half would have gained enough trust in the Internet in general to transact outside a secure banking environment.

The next question is what this means for spending online. Firstly, only about half of online banking users also transact within the online banking environment (i.e. not only accessing account information). Using a similar proportional basis, of these 400 000 or so individuals who have gained enough trust in online banking to transact on a banking site, it must be assumed that around half would have gained enough trust in the Internet in general to transact outside a secure banking environment.Suddenly, we see the real ceiling for online retail: no more than 200 000 online shoppers at the end of 2003. And suddenly, we can understand why even the most successful online stores cannot claim more than around 50 000 individuals actively and regularly shopping on their sites. And we can understand why we do not have Amazons and eBays setting our markets on fire.

But by that very same token, we can also see huge potential in the future. In 2009, on the eve of the World Cup Finals in South Africa (doesn’t it feel good to say that?), we will have three and a half million South Africans with more than five years experience on the Internet. We will have more than two and a half million banking online. And the number of online shoppers will be approaching the million mark.

But by that very same token, we can also see huge potential in the future. In 2009, on the eve of the World Cup Finals in South Africa (doesn’t it feel good to say that?), we will have three and a half million South Africans with more than five years experience on the Internet. We will have more than two and a half million banking online. And the number of online shoppers will be approaching the million mark. Which begs one final question: five-year plans, anybody?

  • Arthur Goldstuck is editor of The Big Change and Managing Director of World Wide Worx, South Africa’s leading independent technology research organisation. He leads World Wide Worx’s research into Internet access, online banking and online retail.

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Posted in the category: Insight, Trends

The 2009 factor

Nelson Mandela South Africa 2010 WorldcupLast week I offered an analysis of Internet growth, electronic banking and e-commerce that showed there was still a five-year wait for the latter to really kick in. Today, he ties the threads into the winning of the bid to host World Cup 2010.

There is hardly a South African who does not realise the significance of the year 2010. The staging of the soccer World Cup finals in this country is arguably even more significant than would have been the Olympic Games, had Cape Town won the 2006 bid.

Over the next five years, most South Africans will feel the impact of the World Cup in the upgrade and creation of infrastructure throughout the country. The arrival of tens of thousands of soccer fans in 2010 itself will be the icing on the cake. And the sweet, unbudgeted cherry on top, of course, will be the potential ongoing tourist flow that will follow from the exposure of South Africa’s attractions to the world.

All of these benefits will occupy headlines, talk shows and debates for the next six years.

But there is another picture developing in the background, outside of this relentless spotlight.

Hidden in the statistics that show rapid uptake of cellular phones, steady uptake of Internet connectivity and slow uptake of e-commerce, is a graphic image of a country heading into an electronic, hi-tech future.

Consider these direction signs to the future:

In 2009, more than half of all South Africans will own a cellular phone or equivalent.
In 2009, close to five million South Africans will have full Internet connectivity.

  • In 2009, three and a half million South Africans will have been on the Internet for more than five years, and a million will be shopping online.
  • More than two and a half million South Africans will be banking online.
  • Wireless Internet connectivity will be pervasive, with Sentech’s MyWireless and equivalent offerings from other network providers available in most urban areas; computer hardware and software will be far more compatible with these new systems than our current options, and it will be a matter of switching on a device, clicking on an option, and the user will be online.
  • The second network operator will (finally) be up and running, making for a range of competitive choices in communications and telecommunications.
  • The Convergence Bill will finally have made it past an array of vested interests, and VoIP, or voice calls via data signals like the Internet, will be legal.
  • Thanks to initiatives like Gauteng Online, tens of thousands of children in high school today will emerge into the working world by 2009 with knowledge of the Internet, convergent technologies and the world of electronic communication.

With luck, even the Gautrain will be ready to roll, providing high-speed and, we hope, efficient, transit across Gauteng, improving general efficiencies in the region.
The South Africa of the 2010 World Cup will be an integral part of the new world of high-speed, ubiquitous connectivity and connectedness. Visitors to this country will barely notice the transition from their global communications systems to the local network.

With luck, even the Gautrain will be ready to roll, providing high-speed and, we hope, efficient, transit across Gauteng, improving general efficiencies in the region.
The South Africa of the 2010 World Cup will be an integral part of the new world of high-speed, ubiquitous connectivity and connectedness. Visitors to this country will barely notice the transition from their global communications systems to the local network.

Is this too much to wish for?

The truth is, it is a reality we will find ourselves facing in 2009, whether we want it or not. The progress towards this vision is inexorable. It will take far more to stop it from happening than to make it happen.

  • Arthur Goldstuck is editor of The Big Change and Managing Director of World Wide Worx, South Africa’s leading independent technology research organisation. He leads World Wide Worx’s research into Internet access, online banking and online retail.

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Posted in the category: Insight

ITU Telecom Africa 2004: Advantage Africa?

By Thrishni Subramoney, Highway Africa News Agency, reporting from Cairo

Competition between market players and independent communications regulation are the keys to Africa’s IT castle. That was the message for delegates at the opening forum session of ITU Telecom Africa 2004 held in Cairo last month.

However, just as crucial a point for the keynote speakers – ITU Secretary General Yoshio Utsumi, Ugandan Minister of Works, Housing and Communications, John Nasasira and Tunisia’s Transport and Technology Minister, Moutasser Ouaili – seemed to be the question of just how advantaged Africa really is.

Armed with a statistics-laden slide presentation, Utsumi pushed the positive line about African ICT growth, pointing to the phenomenal growth of mobile networks in region (the cellphone market in Africa has grown by 1000 percent in the last five years, according to the latest ITU statistics). “The ICT sector in Africa is healthier than ever before,” he stressed, “It is the fastest growing market for the Internet and mobile phones.”

Utsumi says the “building blocks” for Africa’s growth has been the increase in competition between telecommunication service providers and the mushrooming of independent regulators in the region. ITU reports say that since 1993, the number of countries that have a competitive telecommunications market has almost tripled, from 16 to 41.

Nasasira – who took the stage after Utsumi – was not as glowing in his analysis. He acknowledged the growth in the sector, but he pointed out that it was far too early to be jubilant.

“I agree with the Secretary-General, that much has been done in Africa, but let’s not forget the challenges and constraints we still face. More than 50 percent of Africans have never made a phone call,” he said.

Nasasira says there has to be a number of changes on the continent before Africa can make the best of its apparent “advantage”. The changes included social and cultural reforms to ensure that all Africans regardless of race, gender or ethnicity have ICT skills.

He stressed that the biggest problem in Africa was a lack of affordable resources. “Over 50 percent of people on the continent earn less than one dollar a day and 40 percent are unemployed,” he said.

Nevertheless, Nasasira still believes in the importance of the burgeoning mobile networks on the continent. He says that when he took up office as a minister in Uganda in 1999, he often faced criticism about the fact that there were more mobile connections than fixed line connections in the country.

“I was told this like I should feel guilty,” he laughed, “But mobile phones are appropriate for the way we live in scattered villages and fixed lines are far more costly in terms of infrastructure.”

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South Africa's SMEs buoyant

Small and medium enterprises in South Africa are alive, well and regard themselves as highly competitive.

This is one of the key findings of SME Survey 2004, a project that researched the role played by government, information technology and financial services in small and medium business in South Africa. Conducted with the backing of Hewlett-Packard and Standard Bank, the research involved interviews with 2919 SME business decision makers.

A startling 86% of the SMEs surveyed regarded themselves as somewhat competitive or very competitive. A further 12% believed themselves to be neither competitive nor uncompetitive. This left a mere 2% of SMEs who believed they were not competitive.

“This bears out all the assumptions that have been made in recent years about SMEs being the new driving force in the South African economy,” says Thierry Boulanger, Hewlett-Packard South Africa’s Solutions Partner Organisation manager heading up the SMB, Corporate and Enterprise Managed Partners division.

However, few of the businesses give the Government’s SME initiatives credit for their competitiveness. Less than 1 in 10 of the respondents rated government efforts to promote small business as effective.

Given the enormous resources Government is putting into SME development, this reflects poor communication rather than poor strategy. This is borne out by the findings, which show that no less than 70% of respondents gave government a poor rating for the way in which it communicates these efforts.

At the heart of the survey, SMEs were asked to rate the impact of various Government initiatives, from SME and business support programmes to legislation and regulation, on the ability of companies to survive or grow. SMEs were reasonably positive on legislation, with 41% of respondents positive on the impact of legislation in general, and only 21% negative.

“SMEs understand that a strong legislative foundation is needed to provide a healthy business environment,” says Spiro Georgopoulos, Director of Business Banking at Standard Bank.

The same proportion, 41% of respondents, was positive on the impact of import/export legislation, but with 33% negative. Impact of skills development programmes (30% positive) and impact of BEE (28% positive) also scored reasonably, but had more negative respondents than positive.

“The extent of neutral respondents, around a quarter to a third on most issues, indicates the opportunity for government to use communications to change perceptions,” says Georgopoulos.

The lowest ratings were given for the impact of general Government incentives for SMEs, with a mere 12% positive, while impact of SME support structures received an 18% positive rating, impact of preferential procurement 23% positive, and impact of export incentives 25% positive.

A high proportion of respondents, 41% of the total, reported a BEE component to their business.

About SME Survey 2004

SME Survey 2004, an annual research project on the factors influencing small, medium and micro enterprises in South Africa, this year focused on the role of government, information technology and financial services on SMEs. The project was backed by Hewlett-Packard and Standard Bank, and included interviews with 2919 SME decision-makers during March and April 2004. The research was led by Arthur Goldstuck, MD of World Wide Worx, call centre research services were provided by Netsurit, and strategic marketing and project management services provided by Debbie Whittaker of Coolcumba Communications and Celeste Whitaker of Fizz Marketing. The survey is a project of SME Survey (Pty) Ltd.

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South African Firms Know How to Ride the Storm

By Charles Webster

In a recent report titled “The Innovator’s Advantage”, Accenture surveyed 581 executives in 18 countries. Overall, it found that the businesses that were most innovative used technology more successfully than others. South African executives reported that, because of their experience of working through periods of economic instability, the present downturn is having less of an impact in South Africa than in many other places – though it may not always feel that way.

General conclusions about the country include:

  • South African executives are in touch with their organisations and understand how to reform them to achieve senior executives’ priorities;
  • IT has an important role to play in developing and supporting business strategies;
  • The impact of the global economic downturn has been felt less in South Africa, though businesses still believe they are very vulnerable to swings in investor confidence;
  • The need to reduce costs has been an important influence on business in South Africa;
  • Firms are reshaping their organisations and rejuvenating their range of products and services in order to attract new customers.

The majority of companies are expanding their operations and diversifying their sources of revenue. South African business leaders polled in the study were aware of the problems facing their organisations, and were responding with a commitment to organisational change. Technology has played an important role in re-appraising operations (both back- and front-office), but the desire to reduce costs has had a significant impact on attitudes to IT and innovation.

Despite concerns about the bottom line and the stability of stock markets, leaders in South Africa have been proactive in expanding their operations and focusing on opportunities in new markets. They are also more likely to re-appraise their range of products and services and to convert internal business processes into saleable commodities than companies in almost any other country surveyed.

South Africa have been proactive in expanding their operations and focusing on opportunities in new markets. They are also more likely to re-appraise their range of products and services and to convert internal business processes into saleable commodities than companies in almost any other country surveyed.

Corporations are aware of the need to re-structure their back- and front-office operations to support this agenda of change. A high proportion of South African businesses – higher than in any of the other 17 countries surveyed – report making extensive changes to marketing and sales (67 percent), operations (47 percent) after-sales service (40 percent) and procurement (37 percent), in order to support their push into new geographic and product markets.

Technology investments were well aligned with these priorities – over 80 percent of executives indicated that their organisations had either installed or planned to install supply-chain, CRM and after-sales service systems. Another 60 percent of executives had installed or planned to install F&A, eLearning and business intelligence systems to address cost and workforce performance objectives. Given how closely these investments are aligned to strategic priorities, it comes as no surprise that a significant majority of South African executives (90 percent) believe that IT is a source of competitive advantage for their organisations.

Concerns about costs underlie many aspects of business strategy in South Africa – perhaps partly because of the perceived exposure to currency fluctuations. Just under half of those surveyed pinpointed operational costs as a main priority for their organisation. More than 75 percent of those surveyed believed that cost issues presented a barrier to the use of IT systems to expand and develop their organisations. A further 70 percent also cited cost concerns as an important reason for collaborating with other organisations. And South African executives were more likely than those in other countries, such as the United States or Brazil, to regard innovation and cost cutting as equally important.

Despite this, a far higher proportion of South African executives (83 percent, the same as Brazil), than US business leaders (63 percent), are currently piloting initiatives and IT systems to address their top strategic priorities. Actions speak louder than words, and in this case perhaps innovation and experimentation is more important to South African business than might be thought at first glance.

For more information contact Charles Webster on charles.webster@accenture.com

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Daring to win with innovation

WOLFGANG JAKOB, CEO of T-Systems SA, explains why innovative firms are the ones that survive cut-throat competitive forces…

he only sure thing these days is change. Tastes, trends, technology and timing can alter at the drop of a hat. Product lifecycles have shrunk, company lifecycles have been compressed and there is no such thing as a guaranteed market or job security.

To make it in a highly competitive and flexible environment, companies and individuals have to be watchful and learn on the run; they have to find better ways of doing things, all the time. It is hardly surprising that strategists say the capacity to innovate is the only sustainable competitive advantage.

Much of the pressure to innovate, and the capacity to do so at a rapid rate, is due to globalisation. This planet-wide interconnectedness is proving to be both a blessing and a curse to businesses, regions and countries.

Free trade, mobile capital, and technological and communications advances have brought almost endless possibilities. Market vistas have opened up, input costs are dropping and the production process can be cut up and allocated to the cheapest countries.

But globalisation has also extended the risk of being ousted from the market. South African firms who venture into the export market can attest to the hostility of global competition. However, domestic firms selling to the local market are also finding it increasingly difficult to hold their own against imported competition.

Competing successfully, on a sustainable basis, requires the ability to second-guess technological leaps and their implications for product development and market tastes. Any advantage that firms may have in meeting market needs is likely to be short-lived, though, and has to be topped before the competition cribs the idea.

Firms have to adapt quickly to macro-level shifts, too. Global trends, such as political crises, currency moves or commodity-price swings, can topple one set of market leaders in favour of another. For instance, South African firms compete globally with the handicap of an overvalued rand. Overcoming this obstacle to price-competitiveness and capturing the attention of potential buyers takes some serious lateral thinking.

Innovation is the critical challenge for businesses in an era where they are differentiated by their ability to adapt dynamically to marketplace changes and to meet changing customer needs on the fly.

This kind of creative thinking need not generate a “Eureka” moment to be of value. Forging ahead is not only about technological leapfrogging; rather, staying in the race could be a matter of behaving in an innovative fashion all the time and moving along bit-by-bit, but continuously.

Incremental advances in business models, product types, production processes or sales approaches could be what sustains the competitive edge. It is about defining a business benefit and then making it work in new ways. It is about finding ways to do things smarter, better and faster, often with the existing infrastructure.

Innovative behaviour can never be in over-supply. That much is clear from the fact that companies devote enormous budgets to research and development, in the hope that the outcome will be profitable innovations.

Those companies that can afford to dedicate resources to innovation departments may act as leaders in technology or product design, or in finding other new ways of doing business.

But the thing about the brave new world is that the market leaders need not necessarily be the big, monopolistic companies of yesteryear. Today it may be a matter of brains and agility, rather than brawn that does the trick. Besides, the advantages of being first to the market, or first with the new idea, are short-lived.

Theorists call the company with brains a learning organisation. Such a firm is one that is permeated with a culture of learning, so that each employee has the desire and capacity to do better or differently, continually. It is no longer enough to have one department or leader who does all the thinking and learning, or one corporate bigwig who guides the company to success.

When innovation becomes a culture, it becomes a sustainable route to global competitiveness. But the incentives built into these competitive forces do not guarantee innovations that will bring sustainability in the broader sense.

It is up to corporate and national institutions to ensure that innovations do not merely drive short-term profitability, at the expense of the structure and health of communities, or the environment, or the long-term sustainability of the global marketplace.

  • Wolfgang Jakob is CEO at the ICT company T-Systems SA, the main sponsor of the Age of Innovation & Sustainability Awards. To contact them, e-mail Ronell Stutzer, communication specialist or phone her on 011 254 7563

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Lynn Brewer the Enron Whistleblower's Warning

Confessions of an Enron Executive:   A Whistleblower's StoryWhen Lynn Brewer decided to blow the whistle on dark dealings at Enron, she was treated as a traitor instead of as someone who wanted to save the company. I interviewed her on the role of the whistleblower.

AG. Do you believe what happened at Enron was more a product of the time and the kind of environment in which Enron was operating, or does it rather represent the kind of executive overreaching that could happen at any time in any organisation?

LB. Honestly, Enron’s story is a combination of both points you raise. On one hand, the recklessness of the corporate culture promoted the behaviour that caused the company to implode. However, having said that, today, nearly three years later, the Securities and Exchange Commission (the governing body for publicly traded companies) is receiving 20,000 whistleblowing reports per month, which clearly indicates that perhaps we have an epidemic.

The Sarbanes-Oxley Act of 2002 put in place a number of requirements that will make it more difficult for companies to sustain the sort of behaviour that we witnessed at Enron over a long period of time causing greater damage to the stakeholders; however, there will still be companies that seek to look for the loopholes.

Six years ago, the average amount of time that a mutual fund held stock in a company was three years. Today it’s 11 months, which places incredible pressure on leadership to take aggressive measures to make certain they meet their targets. If a company misses their projections, they are punished by a sell-off of the stock, causing them to create a cycle of yet further aggressive behaviour.

AG. What do you think is innate in otherwise intelligent business leaders that allows them to ignore whistleblowers when the stakes are so high and the consequences can clearly be so disastrous?

LB. I think, at least in the case of Enron, it was three attitudes: 1) Arrogance that caused leaders to discount anyone who might criticize their actions; 2) short term strategy vs. long term sustainability; and 3) denial as to the consequences of the first two attitudes.

Unfortunately, many leaders naively assume that having cohesiveness outweighs the benefits of conflict when actually a true leader doesn’t mould everyone to be a follower but learns to manage the polarities between his or her personality and strategy with those who need to hold them accountable. Certainly a “warning” that we are in the path of a runaway freight train is a good thing. But, in the end, I think most leaders are in denial about the fact that at any time, they could become the next Enron.

AG. Why do you think whistleblowers are treated as pariahs rather than as heroes in the early stages of the “whistleblowing process”?

LB. While most believe whistleblowers are simply disgruntled employees, truth be told, most of the once I have spoken to, myself included, were very loyal to the company but had simply hit their threshold of pain. Rather than sit back and watch the demise of the company, they manage to find the moral courage that allows them to confront their own fears to address the real issues. Quite frankly, any company that refuses to listen to those who have information, whether good or bad, is a disaster waiting to happen.

AG. Do you think rigid hierarchical structures in corporations works against whistleblowing?

LB. Yes. Whistleblowing isn’t necessary where there are open lines of communication. The healthiest organizations have no barriers to the lines of communication. Rigid hierarchical structures tend to disengage employees destroying the communication and thus the loyalty. When this happens, employees (at least in the United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

LB. I don’t know that I would describe the corporate cultures of the “dot-com” era as “laid-back” as much as immature and lacking in capital stewardship. In my opinion, much of the “burning” through money was brought on by the investment community that promoted the mismanagement of investment funds. Interestingly enough, I think there was sort of an expectancy that a large number of the dot.com companies would fail simply because they had no proven business model, where the more formal cultures tend to have (at least on paper) the representation that they have solid business plans – which is why it is so shocking when these more “traditional” bricks and mortar companies fail.

AG. Do you think such laid-back corporate cultures make whistleblowers’ roles any easier?

LB. Again, I think in a more “laid-back” culture, you tend to have more open lines of communication where more people feel engaged. I think it is important to differentiate between laid-back and unstructured. Enron was not laid-back but unstructured. The structure and controls the company represented they had simply were not there. No controls and no structure will ultimately cause a company to implode. A laid-back culture on the other hand, more along the lines of what we are seeing with Google, can be quite healthy and sustainable Of course, time will tell once Google goes public and the pressures to perform are placed upon them – they may lose their laid back style and if they have no structure or controls; they too will be just
another dot.com failure. However, having said that, the role of the whistleblower is never easy. Statistically speaking, 50% lose their job and 25% of those lose their families.

AG. Is there a different imperative for whistleblowers in emerging economies such as those of Africa in general and South Africa in particular and, if so, what is the difference?

LB. I believe along with an emerging economy comes a greater responsibility – both to act with integrity and to report those who fail to act with integrity. Unfortunately, in the United States, while we make up 6% of the world’s population, we consume 24% of the world’s resources. We have not learned the simple “economics of enough”. Unfortunately, as we move to a more global economy, many countries seek to emulate the United States, which can be a fairly dangerous thing to do.

I fear that Enron was simply a warning sign of where we are heading as a nation and that the same arrogance that brought Enron to its knees is likely to bring the United States to the realization that they may very likely be the next Roman Empire. My hope is that emerging economies all over the world would heed these warnings. Consider the United States your greatest whistleblower.

Lynn Brewer is author of “Confessions of an Enron Executive” and president of The Integrity Institute. She can be contacted on +1 253 843-0202 or by
e-mail at Lynn@TheIntegrityInstitute.org.

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Brand Trends, 2004 and beyond (Part 1)

What will the brand environment look like in 2004? What lessons have been learned from 2003, and what will the brand trends for the coming year be? The founders of Idea Engineers, MANDY DE WAAL and JANICE SPARK, examine brand trends for 2004, and beyond, in the first of a two-part series.The brand took a big leap forward in business consciousness in 2003, moving from the realm of the marketing department and into the boardroom as an important strategic pillar. In 2004, local and global companies will be pushing to turn the theory into profitable reality…

1. A South African Identity Will Be Brand-Critical

Local is already pretty lekker in branding terms, and the year’s hectic political schedule will see even more ‘nation-positive’ spin in the media. Backed by the good work of past years, South African culture will be even more cool, and a strong local flavour will elevate the legitimacy of a brand’s status. For international brands this means paying careful attention to the mood on the street, and sincere attempts to tie this mood back into brand experiences, and products.

But…

Given the popularity of brand South Africa, there’s going to be an awful lot of ideological clutter in the market. Those seeking to simply leverage local trends for positioning purposes might hit a brick wall. A South African identity is about more than a feel good pay-off line.

2. Community Involvement Equals Competitive Advantage

Corporate Social Investment (CSI) will finally start to move from a vague business adjunct to a business imperative. Apart from the dictates of an increasingly rigid regulatory environment, sustainable development is essential in a wider context; driving the health of society in general, and the health of the brands that service it. Expect strong moves from ‘blue chip’ brands towards meaningful community interaction and the opening up of brand touch-points through community involvement.

But…

Those brands that aren’t interacting with communities on a personal level and are defaulting to ‘cheque book’ CSI will be missing out on a major growth opportunity.

3. The Internal Brand Takes its Place

2004 will see significantly increased spend on internal brand programmes, as companies look to align internal resources with the brand to deliver a consistent on-brand experience that drives bottom line profitability, customer loyalty and shareholder value. The brand will take its logical place as a point of differentiation in the market, and internally businesses will rally around the brand to support this differentiation from an operational and experiential perspective.

But…

Companies need to be careful and, more importantly, thoughtful in their brand-centric dealings with employees, and must be sure to align internal brand-centric programmes with reward and understanding. In short, developing a brand-centric operational environment must be a participative process.

4. Experiential Branding Will Keep On Growing

Product and price parity will tighten their grip across most sectors, and experiential branding will become an increasingly critical point of differentiation, and customer loyalty. Expect most major players to continue to extend the brand experience well past product. The likes of Kulula.com will be able to capitalise on the hard work already done in this area, while the stragglers will be looking to catch up – as soon as possible.

But…

Companies will have to make sure that the consumer actually enjoys a good brand experience! A lot of consumers are starting to buckle under the weight of mediocre brand interactions.

Next, in part 2: Managing Reputation, Brand Protection, Youth Culture and Advertainment.

Idea Engineers is a strategic marketing company that develops brands. More information by calling (011) 803-8111.

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Swallowing Google whole

Just as in the wonderful Douglas Adams tale The Restaurant at the End of the Universe, where the ultimate restaurant is a symbol for all that is excessive on earth, the Internet can also be viewed in culinary terms in order to explain the excesses of both the hype that bedevilled it and the counter-hype that followed. This, in turn, can help us understand why the listing of Google on the Nasdaq stock exchange is causing such heated reaction from both its detractors and its cheerleaders.First, imagine that the Internet and all the old, new and convergent technologies revolving around it, powering it and being powered by it, make up a vast international restaurant.

There were those who refused to eat there, believing it to be too fashionable, or threatened by the apparent sophistication of the place, the menu and the waiters, and afraid they would not know how to conduct themselves there.

There were those who refused to eat anywhere else, believing this to be the only way dining could now occur, seduced as they were by the apparent glamour of it all.

There were those, whom we may call investors, who rushed to eat there as often as they could, simply because they heard that everyone else was being seen there. And, of course, there were those who saw it as a useful venue to add names to those already on their lists.

When everyone realised that some of the more high-calory items on the menu offered up to investors in the Internet were overpriced and offered only scraps on diners’ plates, the doomsayser feasted on what they imagined was the carcass of the new economy.

Analysts from both the old and new ecomomy sides of the fence all suddenly agreed that the old rules did apply after all, but in their haste to repair the damage they had caused when buying into the belief that the old rules had been thrown out, they dismissed the Internet as a passing fad.

And they got it wrong yet again.

What the doomsayers were doing was judging the restaurant by what they found in the garbage cans outside the back entrance. That’s where the leftovers from the old menu had been dumped along with the carcasses that had served their purpose.

But you don’t taste the leftovers to determine the value of a restaurant. You don’t stand outside the restaurant and look through the windows to count how many people may be suffering from indigestion inside. You have to go into the restaurant, you have to speak to the diners, and even take a walk through the kitchen.

At the tables you discover that those who have selected their dishes wisely are having a satisfying meal; those who dine at a range of restaurants, including this one, are quite happy with the service, the fare and the price; and even the kitchen, though it may have messy corners and workers who underperform and pots that have boiled over or just won’t come to the boil, serves its purpose as long as the demands made on it are not too great.

So it is with the Internet. It is a superb tool to include in general corporate strategy. It does not always perform as expected, and those who have too great expectations of it come away hungry or angry. Those who ignore it totally have enough other tools in their kit to keep their businesses going, although they may be missing out on a rewarding experience. Those who choose only the Internet as their arena of business more often than not come away with severe financial indigestion.

If you swallow the Google promise whole, of course you stand a high chance of suffering heartburn. If you reject its promise, of course you risk losing out on a great financial repast. Google may be a great business, and an even greater brand, but it is not the final word in business. The hyped-up but discredited Internet evangelists who see Google as the salvation of their burned reputations need to be put on sedatives before they start talking up the whole menu based on one dish.

But the same applies to the sour bankers who dismiss Google’s investor-friendly approach. The search engine company wants to spreading the potential rewards and bypass a number of mechanisms created by the financial institutions to boost their fees from IPOs. But there is no rule that says the banking business must come before the people business.

And if Google fails the taste test? Sure, it will damage Internet stocks, but it does not alter the significance of global connectivity by one byte.

The etiquette at this restaurant is not that you eat only here or not at all, but rather that you decide how it can fit into your diet, choose carefully and then eat sensibly. If it is not the right place for you, you make that decision based on your needs and what is happening in the restaurant. You certainly do not forage about in the garbage out back to have your prejudices proven.

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Brand Trends, 2004 and beyond (Part 2)

What will the brand environment look like in 2004? Last week MANDY DE WAAL and JANICE SPARK examined four major trends: South African identity, community involvement, internal branding and experiential branding. In part 2, they look at the next four big trends …5. Managing Reputation Will Remain a Major Challenge

Following Enron, Worldcom, Parmalat et al, reputation is an obvious brand bear trap, especially for global players. Expect an acceleration of PR’s move away from spin doctoring and towards the protection and nurturing of company reputations. The role of PR in building and maintaining company reputations will (slowly) become more valued and understood.

But…

This trend ties into the growing necessity of brand transparency. Those brands seeking to build reputation as a creative exercise (and to coax the public into believing they’re something they’re not) should beware. As Parmalat will be able to testify, the public backlash against deceit will be strong.

6. Brand Protection Becomes an Imperative

Expect the counterfeit brand business to keep on booming on the back of the real thing in 2004, and expect a consequent elevation in the need for legal services in this area. Also look for a continuation of litigation in the culture jamming sphere. Expect to see Laugh it Off conducting more TV interviews outside the high court, and look for more confusion from the big brands on how to handle culture jammers.

But…

Big brands will have to be careful not paint themselves into the wrong corner by chasing after people that are making fun, or money, out of them. Endless court actions could lead to public perceptions of the ‘big bad brand’.

7. Youth Culture

In 2004 the clamour for the hearts, souls and wallets of the youth will hit fever pitch. Expect every brand under the sun to jump on the hip hop bandwagon – and expect the youth to be getting more than a little bored with the media’s interpretation of their lives, and the continued onslaught of ‘buzz branding’.

With YFM having taken a firm grip of the youth culture power seat, the issuing of more radio licences will open the door for new ‘bright young media things’. Whether any will be able to capture the imagination like Y has done is open to debate.

But…

Youth brands will need to find the balance between intellectual integrity, social credibility and making money. Walking the tight rope will be tricky.

8. Advertainment

The product placement blitz will continue, with more and more TV and radio shows being designed around the sponsor’s objectives.

But…

Consumers are increasingly media literate. How effective is Advertainment really? It’s anyone’s guess…

The best advice we can give to marketers for 2004 is to hang to your hat, and don’t get swept away by the hype. As always, under promise, over deliver, and make sure that whatever brand innovations you undertake you do your homework carefully. The experiential brand environment is now common place, and consumers will be turned off by brand experiences that aren’t backed by slick delivery of the product itself.

The public wants to know more about the business behind the brand. Does the business operate ethically in social and environmental terms? These are big questions that companies will need to be able to answer honestly. Consequently, reputation management will become an increasingly critical component of the overall business strategy. For many companies the move from spin doctoring to transparent reporting will be a major challenge.

Idea Engineers is a strategic marketing company that develops brands. More information on Idea Engineers is available or by calling (011) 803-8111.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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