Apple is the No. 1 Client Device

A report out by Canalys on the final quarter of 2011 puts Apple ahead of HP as the preferred client device amongst corporates and consumers. Who would have ever thought that? Apple as the domain of geeks and marketing agencies is officially a thing of the past. Ty, you were right all along.

Some will say that this is wrong accounting as it includes iPads and iPhones in the total - but this is the entire point about the rapidly shifting client device market in corporations, the device is fast becoming the choice of the user not the company.

Bring Your Own Device (BYOD) is a real phenomenon and it is helping Apple become a corporate standard in a world traditionally dominated by PCs and Microsoft. 

Learn a lesson, everyone. There is not a penny of discount given for Apple products whether it be an iPod, iPad, iPhone or a Mac and they are top of the range end user prices. The PC market has been long rated as a commodity market and wags will tell you that Apple would never become a corporate standard as resellers and Apple itself never negotiate. That's another myth busted as Macs continue to grow and take market share off all the main players like HP, Dell, Lenovo and the rest. The PC market is no longer a price sensitive, high competition market - Apple have redefined the way to sell.

How did Apple do it? By winning the hearts, minds and wallets of real users through innovation, ease of use and entire new ways to buy products and applications. Incredibly, real users have gone back into corporations and not asked but demanded that their tablets, smartphones and, now, Macs be attached to the network even if they foot the bill themselves.

Microsoft, HP, Dell, everyone, never saw this coming that not just Apple but their operating system would take a massive chunk of the world dominated by the PC. Recent figures released by Microsoft show that they can no longer rely on consumers for their profit - now they are being squeezed in corporations.

The pace of change is incredible and none of the mighty companies saw it coming. Apple is the No. 1 client in corporations.

Pinch yourself, it's real.

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The Future of IT Distribution

I sampled distribution as my second job after starting life at HP as a fresh-faced graduate. That was mid-eighties and if I am really honest about it the fundamental issues in distribution haven't changed drastically. We still talk about vendors, stock, margins, credit and marketing co-op.

It is fair to say that there has been a lot of consolidation which has brought about a small number of 'super-broadliners' who operate on a wide scale though none of them are truly global. But there are also quite a large number of more specialist distributors and there are plenty of small to medium sized players who service specific markets by products lines or geographies who do very well. What has changed is the overall volume bought through what we describe as 'The Channel' over that time and its importance to vendors.

I remember, as a young General Manager, when Digital invented its Green Space/White Space policy and tried to preclude the Channel from playing in their major accounts and Peter Herke grew DEC Direct to take over. That strategy probably plotted the pathway of destruction of one of the industry's finest businesses. It ended up in the hands of its worst enemy, HP, after scoring an own goal of monumental proportions. That own goal was to underestimate the importance of Channel in the dynamics of the market.

So, after all these years of importance, why are we suddenly saying that the Channel, and specifically distribution, has to change?

Many analysts bring up the concept of 'Value'. The most common misconception of distribution is to say it is only good for moving product in the market and handling credit. So for that, vendors think they should 'pay' no more than a slight premium on what they would pay a good carrier. That might describe hardware, but software has been a different for quite a while. In fact, boxed software only really exists for retail shops these days.

But there is a change happening that is fairly fundamental. The Cloud does create new possibilities. Most large distributors talk of The Cloud as being something that may build momentum over time and then they can play 'catch up' as time goes by. I think that's a mistake.
You see, the writing is on the wall. Hardware distribution is perceived as 'valueless' buy vendors and at one of the scale broadliners are offering new concepts of logistics-led services such as not actually buying and selling but just logistics. That model has only so far to go as ultimately distributors rely on carriers to ship which means only the warehouse space is left and maybe some invoice printing on vendor headed paper. This, to my mind, is one of the shortest lived strategies possible for distributors as they are effectively opening hardware distribution up for logistics companies. This model does not even include credit - it is just distribution leveraging its contracts with carriers.

The other area that is open to large distributors is 'White Goods' like consumer electrics. Esprinet in Italy already trades handsomely on this. In fact, so simple is this form of distribution that its model is more attractive in terms of margin opportunity than high end storage and servers. The big trick is credit as there are tons of small resellers as well as big retail chains. That usually means small credit lines and higher margins. Nice business.

All this detracts companies from what is happening in software. The assumption is that, at some future point, distributors will just become 'aggregators' of software via some kind of portal. Most are looking at working with some kind of hosting centre and then trying to fathom out how on earth they would charge and make money.

But there is a risk here. Having been through the early SaaS model at a vendor, we decided there was no need to use traditional Channels. You see credit was not an issue - we never did a credit check on any company, large or small. If someone did not pay a bill, we simply cut off the service. Despite monthly charges, most companies paid us the annual fees upfront with no discount offered. We only gave discount for multiple year deals.

We used different Channels to offer pay-as-you-go, by-the-minute services as this suited us. And so some users received the service as an event based rental or over-flow facility. Gross margins overall were 80+% as a vendor and there were few middle men and not one classic distributor or reseller. In fact, the major player in that market, WebEx, finally got bought by Cisco for $3.2bn without ever having a real Channel. We got bought by Microsoft and most of the technology got bundled.

There is a real danger here that unless a distributor shows leadership, creates a Channel proposition that can be understood, then the software market could drift away. Years ago, with two partners I started a business based on this precise assumption - over time the Channel role in software distribution would profoundly change and, at best, a whole layer would get removed as it was not required. The three of us still like to think we were precursors to electronic software distribution but we were men of the Channel and we knew the world would change. Maybe not quite then.

This time around, it will change. Aggregation of software will not be good enough in itself. There will be many other services around The Cloud which will be equally if not more important. For instance, one of the biggest arguments for The Cloud for large companies will be comparing financial models. Where do you start with that? By auditing current assets. Most large Corporates either don't have a good handle on what software assets they have or have weak understanding of licensing. Either way, it's fair to say most large companies are overpaying substantially for many products and services they receive from power to telecoms to software. Quantifying that overspend is crucial to justifying The Cloud.

For larger vendors, getting their software into the high volume of SME companies has been a perennial issue. Today, the Channel has an important role in that specific supply chain. That will not last much longer as I believe there will be companies who will offer software from multiple vendors to SMEs who do not form part of the Channel today. Look at Amazon and The Cloud for a sneak preview but look at how Tescos and food retailers have muscled in on the mobile market to understand that players from 'left field' have plenty of profits to invest in a huge opportunity. And then there is Private Equity - always ready to back potential game changers. On top of that, I don't for one minute believe that the likes of Facebook and LinkedIn are not looking at additional models to make money to justify their astronomic valuations.

I read recently that one major, more specialised distributor, was refining its strategy to focus only on a small number of major resellers and the rest could get a 'Lite' version of its service. I think that company will die with that kind of old-distribution mentality. Because the smart money will be exploitation of the mass accounts where their skills to leverage vendor relationships and 'electronic logistics' should yield higher margin business. The argument would be to minimally service large resellers as that opportunity will surely give less value and margin opportunity over time. Heck, we all know how little money there is in selling highly technical goods to someone like Computacenter. That is not a sustainable business model.

So some distributors will see the Blue Sky through The Cloud. I have read a fair bit about Blue Ocean strategies where businesses have moved out of crowded markets into calmer oceans which yield higher profits. The problem is that most distributors think there is no money to be made in The Cloud today.

That's because they don't understand it. By the time they react, it will be late and it will cost more to get in, against a backdrop of their traditional business suffering under higher pressure.

My message is 'Invest while you have the money'. Investing when you don't have the money is a lot, lot harder.

Acer - The Untold Story?

Finding $150 million of inventory you 'thought' you didn't have is quite a mishap.

I mean, it isn't that easy to miss a pile of computers that high. So when this small line in $4bn+ quarter of sales that Acer reported cropped up it was very big and bad news. But it's a governance thing really as a write off of that size isn't that huge, it's only Europe that had the problem and it's a one off anyway.

It is a one off, isn't it?

The share price over the last 3 months has halved, the CEO, JT Wang, has foregone his salary and 300 staff will be fired in Europe. I am not sure what percentage of the European staff that is but Acer are traditionally a lean and mean company in Europe so I would venture not for off a third of the staff in the region. That's a big, big mistake then.

Against the back drop of the actual performance numbers, this write off, embarrassing as it is, should not be such a massive blow to the company. And that sort of makes you think, 'What other bad news is to come?' Not that I am rumour mongering but it does reflect a feeling in the channel.

The trouble is that some pundits believe that this little accounting error has been going on a while. When you take industry figures there always seemed to be a mismatch in sales in and sales out data at Acer. In the old days a distributor might have thought about having a lorry circling the M25 at year end with excess inventory 'sold' on phantom orders to be booked back in on day 1 of the new year as 'returns' but in these modern times to do so would be to cheat investors and markets don't forgive.

So are there bigger and wider problems at Acer? We know the PC market has taken a bashing and figures suggest as much as 14% down for Europe, and as Acer is a big share of that it has to hurt. But such figures could be aimed at HP, Dell, IBM and others generally.

I think this story has a way to run. Yesterday alone, Acer shares hit the Taipei stock market limit for a fall in a single day. There may be no smoke without fire.

Unified Communications without HP Sauce

It's something I thought I'd never see. HP sold their video conferencing business for $89m to Polycom yesterday.

It's right up there with Shaq O'Neal retiring and Gavin Henson back in the red shirt of Wales (or any rugby shirt for that matter).

Last year, mainly through the acquisition of 3Com, HP made strong and very meaningful moves in stepping up and contending with Cisco. And HP has a strong story, together with its acquisition of Left Hand it had a 'soup to nuts' solution in terms of enterprise servers and storage and the network building blocks were falling into place while their managed service offering was already well established. Compare that with the bitty nature of Cisco's VCE strategy, their manage a trois with VMware and EMC and their hesitant steps into the server market, one of the key elements of their all round story was Unified Communications. And Cisco had done itself proud by buying one of the thorns in Polycom's side, Tandberg, to augment this.

In the light of that, HP's move to sell and effectively yield their UC play to Polycom was an odd decision. Clearly they must not have been happy with the division's performance but they were establishing themselves as a player and you might argue that an acquisition in this area or at least a management shake up might have been the answer rather than blatant surrender.
It will be even more curious to see how HP handle the story as it develops. They usually have an angle to brief its staff so today should be fun from that point of view after the overnight memory downloads.

As Ian French's Twitter one liner asked last night, 'Where does that leave HP on UC?. My response was 'Half way between nowhere and the toilet.'

Stop Press: More details are emerging on this deal which seems to be some kind of technology and service swap. Polycom buys some Halo product assets from HP while HP then contracts back to Polycom for its UC strategy - or so it appears. This seems like an HP version of VCE in the UC sector and to complete the wonderful series of multi-letter acronyms the new strategy has been dubbed Open Visual Communications Consortium (OVCC).

You couldn't make this crap up. Sadly, someone has defied logic and has done so.

New Year, New Job

According to research from US 'Retention Firm', Finnegan McKenzie, this is the traditional time of year when firms ramp up their recruitment.

It's a bit of a 'No sh*t, Sherlock' moment as lots of firms have year ends in December and so new budgets are agreed for the new year starting in January - on both sides of the Atlantic. However, 2010 is not just any year. For the UK this will be the first quarter, hopefully, of growth since we lurched into recession and so firms are still very tentative about investment plans and unemployment tends to lag the recessionary quarters. So it may not be the bonanza of new opportunities for career change that traditionally happens this time of year.

From the candidate's viewpoint, it is also a time when many people will be looking for a new job. According to Finnegan McKenzie's research this is very prevalent in senior management. They claim up to 51% of senior executives in the US will have actively put out their CV with the intent of changing job or perhaps to test the water by 1 January. This may be as a result of new year resolutions, a desire to increase year on year money, or just a stark evaluation of the previous year and a realisation that the job was not fulfilling or they did not like their boss. Whatever, I think many people in the UK would identify with this 'New Year, New Job' enthusiasm.

In a good year, this would be 'fish in a barrel' for recruiters. Fresh new CVs from highly paid and experienced senior executives to match to a plethora of new opportunities would be the time for a feeding frenzy of fees. I think that will not be the case this year - recruiters are still down on their luck and many are still suffering as the volume of openings are not rising very fast. Still, it has to be a period of hope.

I would argue though, that this is the point where many companies investing in growth make big mistakes. Because the recruiters match the fresh CVs to openings, corners are cut. Only that 51% of senior executives are moving and they are actively after a job - easy prey for recruiters and, I would argue, not the cream of the crop. In fact, I would wager that if Finnegan McKenzie drilled down on their research, then of the 51% of senior executives that put out their CVs at the beginning of a new year, there would be many of the same names as last year. I even wonder how many are people who actually moved jobs last year and want change again?

I always strongly argue, it is those who are not looking for jobs, who are delivering year after year in roles, who are the ones worth chasing. There is a band of senior executives and senior salespeople who are perennial job-hoppers who have great looking CVs but have delivered little sustainable difference to the companies they have been employed by. You can bet that their names will be known in the industry as that is their real skill, networking. I have been involved in the computer industry for many years and time and again the same names crop up. The daft thing is that many companies will mobilise themselves at the mere mention that one of those names are 'available' and they will be snapped up via clever recruiters masked as 'headhunters' who claim they have 'enticed' that name to move. Easy money.

It's a time to be wary. The growth that will be gained this year will come at a heavy price and will not be for the fainthearted. For many of us who have lived through recessions, there will be a period when firms may 'shoot their bolt' and try to get growth too early. This is a period of cagey moves and it also a time for reassessment of old markets and discovery of new as many firms will have learnt in the last two years that much of their business was tied up in too few companies at too low a price and exposed how little differentiation they have. Recruiters themselves have found that particularly revealing over the last 12 months in particular.

The good news is that many computer distributors are bragging of a very strong close to the year and this is a good barometer as technology will almost certainly lead the way in private sector growth. The consumer end was reasonably strong, accounting for good growth and part of that will be spurred by the VAT change, it is thought. But there was also brisk business in the banking sector.

This month sees the end of the first quarter for computer giant HP, December marked the year end of many large firms, notably Cisco. The first signs are there that technology sales are on the road to recovery and that will mean a general return to growth will follow. However, watch out for the 'Usual Suspect' CVs. There will be a mass exodus from firms at senior level - though be very wary that this year it will be for different reasons and the usual bragging rights associated with senior executives will not be there after a recession. Most will be leaving because they have been found out rather than before they have been found out. Recessions tend to do that.

Again, good luck in 2010 - growth may just be round the corner. I hope you find your fair share.

The Battle of The Giants

It had to happen. One of the outcomes of most recessions is that there are some fearfully large consolidations of big companies - and yesterday saw another big announcement in a market sector that is heating up big time.

Hewlett Packard announced it was acquiring networking company, 3 Com, for around $2.7bn in the same breath as producing better than expected profits on lower sales last year. For those in the industry, this the annual musical chairs time at the computer giant, HP, and many will find that a few more chairs than usual have been whipped away as they keep making sure they are as lean as possible.

Ostensibly, the acquisition is to give HP a footprint in the lucrative Chinese market where 55% of 3 Com's sales come from. However, there are other motives as there have been major moves by networking giant Cisco to move into the server market at the datacentre which is a direct threat to the giants of that market, HP, Dell and Sun. The 3 Com acquisition, in that context, is all about augmenting HP's portfolio of networking switches and infrastructure devices to ensure they have all the pieces of the server, storage and networking products required to maintain their market position as Cisco put their formidable weight into this market.

There is more. Cisco's market play into the server market takes it from its luxurious, high profit network business where it dominates into the grimy and lower margin world of PCs and servers where HP have great skill in thriving. It could be argued that Cisco will find it hard to apply its typical cost models in the server market to be able to compete or make a decent profit. HP's move is certainly a clever defence of their position, although in reality, 3 Com has only a single digit market share in Cisco's core markets and was no longer the big player it used to be. Some analysts feel that companies like Brocade would have been a better buy, but in the great scheme of things, any old company in networking would have done.

HP have learned how to acquire and absorb big companies very quickly. Starting with the huge takeover of Compaq which cost Carly Fiorini her job, they have more recently acquired EDS which almost doubled their workforce. Meanwhile, their arch rivals in the PC and server market, Dell, has been building out its portfolio to compete by adding Equalogic and Perot into its midst making it a much stronger company.

What does this all mean for companies, large and small? Well this period of formidable consolidation will likely increase the massive competition in what is already a highly competitive market for PCs, servers, storage and networking. It is likely to drive prices down further which may be a good thing - but for those companies who sell these products, the decreasing profit margins in selling solutions based around these companies and Microsoft is squeezing the life out of what was a vibrant market to be in. I don't think this will make life much better for them.

It certainly means that Cisco and HP are now toe to toe and head to head in the market. It will be a battle royal to win the loyalty of the customers.

One Way To Alienate Customers

I mentioned some while ago that the Sun-Oracle proposed hook up was going to be an uneasy marriage. Their latest marketing effort illustrates how silly this can get.

On the back page of The Economist is an expensive advertisement that proclaims that the performance of Oracle working on Sun machines is better than the same software running on IBM machines. Thus, they proclaim that ‘Sun + Oracle is Faster’. The proof of this claim rather bizarrely will be published or at least be available from 14 October. It does not actually say which October this will be, but we can only assume that it is this year. IBM, meanwhile has about one month to respond to this claim and before they twist the argument, this is as compared to an IBM Power 595 Server Model 9119-FHA to be exact (plus a few caveat figures to prove they actually ran a test) but they do point out in the same small print that this model was available back in December of 2008. So Sun and Oracle have had around 9-10 months in order to beat the performance of that IBM machine and have not considered any subsequent models in between. Oh, and the model, or at least the solution package, is presumably not available until 14 October of some indeterminate year in the future.


So what does this advert say to Oracle users? Not much really. The software is not getting any better and that you need a damn powerful machine to get performance out of it. And if you bought an IBM server to run it, then you are a chump, basically. Yes, in the world of negative advertising this takes a good bite of biscuit. You can infer from the new line of advertising that there must be some kind of ‘tuning’ going on by Oracle to make the behemoth software (they are the second largest vendor of software worldwide with over 50% of their market) run slightly faster on their now home brand hardware – making any other type of Oracle user at a disadvantage. The advert does not mention Dell or HP or any other brand of hardware but one can infer that if the software is now specially tuned for Sun then users of those other brands will also be disadvantaged for the future, if not by 14 October.

What would happen if Microsoft adopted the same approach? It would alienate just about every other manufacturer of PCs should they throw their lot in with, say, HP. Immediately, all those years of careful building of an independent software brand that runs on any x86 chip at speeds controlled by the manufacturer (but the user gets a consistent look, feel and features no matter which one they choose) would be lost as Microsoft would be saying, ‘run it on any other brand than HP and you are getting less than your money’s worth’.

That’s effectively what Oracle has done. Many market analysts saw this as a natural move by Oracle to fight IBM, but it just erodes the software vendor’s independence on hardware. Whether they like it or not, there is a vast world of business users out there that have chosen platforms other than Sun to run their software – now they would really have to start questioning whether their software company is committed to their end user customers or ONLY those end users who run Sun hardware. And remember, Sun were struggling prior to this $7.4bn proposed takeover.

From a customer perception, this advert is the first major manifestation that Oracle has ditched its independence and will be preferentially developing software tuned for the Sun platform only in the future and that there is even now a risk that subsequent versions of Oracle will only run on Sun. So if you are an Oracle user today and not using the Sun platform, perhaps this advert poses two questions rather than the one intended: 1) Should I buy Sun in the future and if not, 2) Should I be reconsidering my choice of software for the future?

In the world of large scale software sales, while you can have umpteen nice OEM deals, latest offers and special relationships with lots of hardware vendors but, ultimately, the last thing you want to do is to lose a deal because of hardware allegiance. Better to make sure they buy your software because it best fits their needs rather than the needs of the hardware they run.

Maybe I am being pedantic here, but I found this advert astounding – then again, I thought the Sun-Oracle tie up a big mistake and smacked more of desperation by one or other of the companies rather than of real strategic thinking.

Sunny, With Dull Patches

So Oracle has bid $9.50 a share for Sun Microsystems, valuing the US hardware fallen giant at $7.4bn. It's a far cry from what Sun might have been worth a few years ago but it currently is worth a 42% premium over Friday's closing stock price for Sun - how the mighty have fallen.

IBM had tried to secure a deal with Sun last month but nothing came of it. To be frank, it may have been a more natural fit in some ways - two hardware vendors with software and services interests combining to plug the gaps in each others' portfolios. But the recent past has seen the once mighty Compaq get severe indigestion when it took over the lumbering has-been Digital only to see the failed combination being bought by HP under Carly Fiorini.

The fact is, Oracle is a software giant and although threatened by the likes of IBM, in reality the two models are poles apart. The computer industry has always segmented the business models of software and hardware. Many hardware companies had software interests but they never really came to the fore and dominated any specific space. Similarly, some software companies have had some hardware interests but again, none that ever really dominated a sector.

The plain facts are that software is a gross margin rich business model with development costs underpinning it. Hardware has seen its gross margins eroded, made worse as each vendor has attempted to service major supply agreements as Prime Contractors and therefore had to buy other hardware vendor products in at reseller type margins, often securing long term supply at single digit margins on other vendor equipment and so dissipating its true gross margin on deals. It has been the nature of the beast in getting revenue growth at the cost of profit. Dell, in particular, has felt the pinch using this tactic.

So what would happen when you combine the two models, particularly of two giants of their specific sectors? I have to say, that the jury is out for me. Sun made a walloping $1.9bn loss last year on £13bn of sales but Scott McNealy, the colourful Chairman behind Sun, reckons that Sun will contribute $1.5bn of profits this year and $2bn next year to the new group.

Industry Speak

Industry analysts reckon that Sun's customer list will give Oracle access to those customers who are not currently using their database products. How often have we heard that kind of speak before? The fact is that hardware vendors rarely 'own' their customers in the way that a software company does unless they have a major stake in their applications or infrastructure. The chances of Sun dictating what database it customers use are pretty slim to say the least. Moreover, it is not as if Oracle is not known in the corporate world so that Sun customers will not have heard of them - all in all it's a silly argument and would be similar to Microsoft buying Apple to force their operating system and products down the throats of Apple customers.

The best way to make such a combination work is to produce database-engine boxes which were tuned in performance to run Oracle applications - 'Appliances' if you like. The storage industry has a number of such products and giants in this sector like EMC and NetApp have acquired strongly tuned software products to work specifically with their hardware.

But such an avenue is fraught with danger, as EMC has seen in acquiring VMware. As great an acquisition as that was (EMC got its money back by floating just 10% of VMware stock), the issue was always that VMware had to remain independent of its parent in order to remain the credible market leader, particularly with Microsoft gearing up to get on the attack. If VMware were to favour its parent by tuning performance or showing preference, long term it could ruin its position with the likes of HP, IBM, Dell and others and so allow Microsoft in as the 'independent vendor' who was hardware agnostic.

This is the danger for Sun-Oracle. If Oracle tries to leverage its new hardware purchase by tuning the performance to the hardware or showing preference in development, then the vast array of hardware vendors will slowly but surely get jaundiced and it allows a gap for an independent supplier with good brains and products to win their hearts as there is no vested interest. Right now, HP or IBM executives who have a strong relationship with Oracle, are probably thinking that all their Oracle installations are potential Sun Microsystems targets.

Long term that may not be proven to be the wisest of choices. If you are going to buy a hardware vendor as a leading software supplier, make sure you buy the biggest as your first step, not the cheapest, as you may just have bought yourself not just a chump but a liability that will lose you a lot of friends.

What may have started as a plan to strengthen Oracle's position against IBM may be the first gong of the death knell of a giant of the software industry. If there is one watchword in this industry that determines success it is FOCUS.

The Power of The Negative

Whilst sitting in the bath, I noticed two pieces of reading material we have side by side on the window sill are, '1,000 Places To See Before You Die' and Richard Wilson's 'Can't Be Arsed'. Essentially Wilson's book is a parody of the theme of the one next to it and is a torrid but funny series of reasons why not to do exciting things or see certain places before you expire. It struck me as odd that such a negative series of thoughts could be turned to profit.

It reminds me of the situation we are in right now in some ways. We are in the heart of a recession and every way we turn there is negative information, news, thoughts and people - it's enough to drive us to despair and sometimes it certainly makes me feel down. Strangely, it as at such times I get more creative, am able to channel more energy into things and get better results. Maybe that's what Richard Wilson (not of 'One foot in the grave' fame) used to be successful with his book - I don't know.

Thinking about the subject further, one of our most useful inventions uses the principle of creating negative energy - I am talking of the refrigerator. Sometimes negatives can be powerful sources for positive thoughts and energy - call it desperation, call it 'when all else fails', it doesn't matter, I like to think of it as inspiration.

Inspired By Negatives

If you want to hear one of the most inspiring talks, then sift through the Harvard Review online and find JK Rowling's address to the Graduation Ceremony last year. She talks to some of the most gifted and un-desperate people on earth to tell them how she found inspiration in her darkest hours. When she was virtually penniless, a single mum, and having lost her job she was as big a failure as she could be. What she talks of was how, at that lowest ebb, she was able to throw off all the inconsequential things in her life that had no bearing on her position and focus only on what was important - her child, her home and a big, big idea.

From this lowest point, Harry Potter was crafted, having already had the idea some time earlier, and it became the focus of all her energy, turning negative energy into an incredible, powerful positive.

I have also read some articles from a chap called Richard Fenton whose mantra is 'Go For No!' in sales and he advocates that you should up your failure rate in sales. His perverse logic is that you need to fail regularly to be successful in sales. I can understand the gist of what he means as the more you fail, the more your desire to succeed should compensate - but that is not common to all people in sales or business. Sometimes failure drags them down.

At this point, the recession looks very negative. Wishful thinking people who have not heeded warnings have literally Hit The Wall and gone from having a successful business one minute to abject failure the next - simply because they had not failed enough in the past to sense it careering up into their faces. When it strikes, they simply abdicate all responsibility to cost cutters and pretend that it is the only way forward - in fact, they have already ruined their business by that point.

So the point of my article today is how negatives can be turned into positives - and how to take the recession by the horns and turn it to your advantage making it something from which to survive and, indeed, to thrive.

Hitting The Wall

When companies Hit The Wall, as I call it, they actually find that, in a very short cycle, just about all of their key business indicators have turned negative on them. I used the example of Norwich Union/Aviva lately who consumed a £multi-million budget to advertise that they were changing their name - yet, with some of the adverts still running, they have reported heavy losses, seen 33% wiped off their share value and shedded 1,900 jobs. They ran straight into a recession while spending more money on advertising in a single period than a good share of the combined sum of the salaries of the staff they have just made redundant.

That's what I mean - it is the idea that one minute the garden is rosy, sales are buoyant, the forecast looks good and you believe that you have a recession-proof business as everyone needs things like insurance. Suddenly, you are in the depths of despair and the only way out is to hand the business across to professional numbers-people and hack the heart out of the business.

For small and medium sized (SMEs) businesses, this can be far more damaging. Too many SME firms have either a one-track business or have too many eggs in too few baskets. When the recession arrives it can be like an absolute bomb going off, literally wrecking the business overnight. I know a recruitment firm that in one quarter went from record sales to 50% drop and had to shed 50% of its workforce. They are not alone, even the mighty Dragon's Den hero, James Caan, has a latest venture which is suffering while Michael Page has seen its worth drop dramatically from the point at which it turned down a bid from a would-be suitor.

Recessions pay no respect to egos or reputations - they can ruin anyone.

Turning Negatives Into Positives

The most common issues faced by firms right now is dwindling order books and low or negative cashflows. The answer in most cases is to dramatically cut costs and try to eek out longer terms with suppliers while voraciously collecting cash. These are the answers from the numbers-people and they make sense. However, it would help if sales went up and cashflow became more positive - but that's the point of a recession, they go the opposite way.

Too often in the recession, the above action is the limit of the thinking. Batten down the hatches until the market gets more buoyant. The sales-driven executives have handed the reins to the finance guys and that's that. When the negatives get too much, too many executives are happy to 'walk away' from their pulpit of success, hand over the power to finance and snipe from their background position about the company's long term prospects.

It's a pity they don't mobilise that negative energy into a powerful force for the positive - if nothing else, the negative attitude will rub off on staff and things tend to spiral from that point.

Here's a thought. If cash is tight and sales are low - how can you find more sales that bring in cash quicker? The first step is to ensure you know enough about your current sales to make an intelligent decision. The decision needs to be about the product or service you want to sell, what its value proposition to the customer is, who would be interested and how you are going to get that message to enough people in a short time to make it successful.

The heart of the decision is to make an attractive incentive for cash payment for the proposition, but the most crucial part is the value proposition - it has to resonate with the customers you choose. Messaging is vitally important here and everyone in the organisation must be word-perfect on the message and spot on in execution.

Very often, the answers to tough questions can lie right in front of you - only the negative thoughts stop you from seeing them. If you have a product or service that is valuable, then make sure the value is realisable fast and compelling - then make sure you know who would be interested, why and make sure you get in front of as many of them as possible, with as many of their objections thought of as you can, and as fast as you can.

A recession will kill those companies who stand still - mobilise your thoughts and people with cohesive messages and actions to turn negatives into positives.

Blue Ocean Thinking

It is always a surprise to hear that many successful companies started during a recession. Dave Hewlett and Bill Packard (HP) started their business in a garage in 1939 building a device used by the Disney Corp. on the film Fantasia - it was not what you would call ideal conditions for a start up. Cisco claims to have started in a recession, as did Facebook. The key to success in a recession is to find a part of the market where there is less turbulence from competitors or is simply an unaddressed need.

In the teeth of this recession, car sales in the US and the UK have dropped dramatically and there is a real risk that many car makers will either not survive or not exist in the same way as before. While sales plummeted 30% in the UK over last year in the peak selling month of March, in Germany they rose by 40% and in France by 10%. In these countries, in conjunction with the Government, a scrappage incentive was offered direct to consumers and backed by a vigorous sales and marketing campaign by the vendors and their dealer networks. The results were spectacular while in the UK we are still considering what to do.

The fact is, there are an awful lot of old cars out there, the dealer network has switched to secondhand selling and the car makers are in too much trouble to see what to do. By the time we do something, it will be too late.

What has happened is that while most car models have dropped in sales, small cars have bucked the trend by selling up 80% on last year - the Ford Fiesta leading the sales charge for the fourth successive month. Here is the plan for the future right in front of people's faces - swap production skills and tooling into making more smaller cars with ultra high fuel economy or new eco fuels and cut mid and high end cars to a minimum and charge a huge premium for them. It is the ideal time for better, more environmentally sound, vehicles to be made and a chance to shape the industry for the future. By using the scrappage incentives in a targeted way, swap out the oldest cars for the new small ones now.

It calls for a concerted line of thought and actions - we have the chance to build a new, better car industry from the ashes of the old, and the opportunity is right here and now.

Blue Ocean Thinking is all about re-invention and in a recession there is no time like the present. The recruitment industry has been cruising for a bruising for some time. In the sustained boom, it grew fat on high fees, low value for money and has spawned a new, valueless level of service on the internet. Recruiters have been very hard hit as companies have cut back on headcount and not replaced those who leave voluntarily. For my example firm, with too few large customers, the effect has been crippling. Correspondingly, large companies have devalued the recruitment process, outsourced it to foreign shores and introduced reverse auctions for placement - how on earth can companies get good people in a recession by using such a valueless selection process? Now is the time to re-invent the whole industry.

I have long held the belief that recruiters should share the pain for poor recruitment. I believe there should be performance related incentives for recruiters so that fees are lower up front and are earned over time according to the success of the recruit and their clients, and I am not talking stock options here. Instead of having salespeople in the recruiters, have professionals who have recruited and managed the kinds of people they are trying to recruit for clients. It will bring back the value in the industry, reduce the costs due to bad recruitment, create more value for recruiting clients and, long term, more profit for recruiters.

The firm that breaks the mould today and offers this kind of model will take the high ground - I know, I have already worked it with clients like Theorem Inc of the USA, and we are both better off for it.

Channeling The Negative Energy

JK Rowling created the most successful series of books in modern times which have also produced a string of fabulous films and merchandising - so becoming incredibly wealthy in a matter of just 10 years. The whole concept was built out of failure and despair. Sometimes you have to fail to realise what its like to really succeed and certainly success tastes that much more sweeter after a failure.

Rowling's message is simple - when you are at the lowest point, you can shed all of the things which are not important and focus only on the things that mean most. It means you can channel all your energy on the things that will bring you most success - by having that single-mindedness you can increase your creativity and make something far more powerful than you could ever do if all you have is success. For many firms, the recession will mean a re-focus on something new or an innovative change to their norm.

If there is one message out of all of this, it is to prioritise. Sit down, think what is important and, quite literally, forget all that is unimportant so that all energy, investment and skills can be applied only to what is important. Don't do an Aviva - now is not the time to blow a lot of money on nice-to-haves. Make sure every penny brings a return.

Make the recession work for you.