What I want for Christmas

I love gadgets / technology and have been trying to find the ideal way to distribute audio / video around the house/garden, within the following constraints:

- wireless
- reasonably cheap (as needs to be deployed in each room)
- supports iTunes content
- distributes TV, music, photos, DVD’s, Internet radio
- looks “cool” and “un-obtrusive” (i.e. not a PC in every room)
- can output to a TV, speakers or Hifi
- simple enough for wife and kids to use
- a simple remote control

There are a number of devices that have come to the market over the past 18 months, including the AppleTV, AirPort ExpressRoku Soundbridge Philips Streamium, Windows Media Edition etc. and some more “up-market” devices as well.

Unfortunately, at the moment there is no one product that can fulfill all the constraints above, although a “system” can be assembled from “point” solutions – my colleague Malc has been blogging on this (as have others).

My personal experience is with the Roku Soundbridge for distributing radio and music (as I live in France I like to get UK radio), Sky disk with 4 LUNs (and hence a cabled distribution of TV).

The market appears “open” for someone to take on this “media enabled house at a decent price point” as all the technologies and interoperability standards exist. However, all the vendors currently seem to be resting comfortably in the “safe knowledge bunkers” – simple design brief (digital rights aside):

1. Central server based on Mac or Windows

- to store CD collection
- to store DVD collection
- to store photo collection
- to store video collection
- to receive TV feeds
- to receive radio feeds
- to stream audio
- to stream video (including static pictures)
- to control changing of TV and radio channels

2. Room media box to

- subscribe to audio, photo and video streams from server
- to provide audio and video outputs
- to receive remote control commands and transmit to server

Does anyone do this well?

Back on air

Apologies for being off air for some while – a combination of France Telecom destroying my ADSL for several weeks and a truck knocked me off my bicycle 20km into the 380km Marseilles to Monaco charity ride. Back now

My firm is worth a billion $

Recently I have been looking at a few businesses with regards to finding a firm which could be grown into something significant, and have been targeting private individuals selling their firms via various sources (including businessesforsale.com )

(For those of you how do not know me) I spent a few years on the “professional” side of creating / buying / selling firms where the methodologies normally lead to the right order of magnitude of price, or at least the right starting point for a negotiation.

What I have found to be quite an eye opener when dealing direct with the owners (rather than through an intermediary accountant / banker / lawyer) is the amazing valuations that the owners attribute to their firms.

For example, a typical conversation….

Me: thanks for the financials and background data

Seller: no problem

Me: what kind of price are you looking for your firm

Seller: 1 billion $

Me: ok, could you tell me how you arrived at that figure

Seller: it is what I think the firm is worth

Me: but your gross profit is 2% and you have zippo on the balance sheet

Seller: does that matter?

Me: it sort of does

Seller: what is your valuation then?

Me: a maximum price of 25,000 Euros

Seller: that’s absurd, there is no way I will sell the firm for that

Me: (explains why the valuation is max 25k Euros)

Seller: what do you know about this business? you are a bean counter

Me: Sorry for wasting your time, get back to me if you are still looking to sell and do not get 1 billion $ for your business

Now I understand and appreciate it is normal behavior for parents / business owners to “over price” the “baby” (overheard at a drinks party – “my child can solve partial differential equations at 2 years old”) – thus there will always be an emotional price and market price spread.

I have even been guilty of “overpricing the baby” myself when someone phoned to buy a firm I owned and I gave him “the 1 billion $ finger” as we did not want to sell at the time.

What amazes me is the people (see above) who really do want to sell their firm, yet give the “1 billion $ finger”. I admire the passion for their business which blinkers them from the real value, but in other ways it is quite concerning that when they finally come around to agreeing to sell at the true value they will feel so emotionally “let down”, they are likely to be very bitter.

I guess the job of a good broker is to be a counselor too.

Does EasyJet price children with Black Scholes?

The “pricing engines” behind products (financial or otherwise) have always been of interest to me (being a closet mathematician). There are some incredibly complex pricing engines within the financial markets and many dollars thrown at being able to produce a better / faster engine (and supporting models).

One pricing engine which mystifies me is the pricing engine behind Easyjet airline tickets – especially as Easyjet positions themselves as a “budget” airline. (living in France, EasyJet is my lifeline back to the UK and I commuted 2 times a week for 3.5 years).

As an aside, I should state I am a massive fan of Easyjet when physically on their planes and respect what they have done to the industry in terms of pricing transparency, but their customer service is really poor when responding to problems (e.g. getting refunds etc. is like getting blood out of a stone) – anyway, back to pricing….

Some observations (based on real facts – the tickets I have purchased and those of my “EasyJet commuter club” colleagues):

- in 2003 I would agree that EasyJet was a “budget” airline as my weekly commute would cost me 70 Euros a week (when averaged across 52 weeks)

- in 2004, price averaged 75 Euros

- in 2005, price averaged 90 Euros

- in 2006, price averaged 125 Euros (which is still not massively expensive)

- in 2005 when changing a booking online the price (excluding the “change booking” fee), was more than the normal fare. So I guess that Easyjet hoped customers would not notice the “difference” (I did and complained but got zero response)

- I just noticed (21st May 2007) that children fares cost more than adult fares (at least between Nice to Luton in August). Try pricing a flight for a single adult, then price the same fare for zero adults and one child, then one adult and one child. Three different fares for the same seat when the underlying price has not moved!

Now, my theory is that EasyJet pricing is nothing more sophisticated than a few blokes / girls sitting around thinking up ways to push up “floor prices” and a computer just taking a “floor” price and generating final pricing as a function of “time to flight” and “availability” (reminding me of the recent Nationwide adverts on TV) – e.g.:

- The Nice/London flights generally transport wealthy people, so lets see how far we can push the prices each year (I am sure they do the same on other routes)

- Is there an event on? (e.g. Cannes film festival, MIPIN conference and Monaco Grand Prix), then let’s set the “floor” price higher

- Let’s cut routes that appear not to be profitable (without consulting customers)

- Let’s try and hide price rises where customers may not notice (e.g. when changing a booking or traveling with children)

Now….

- In 2007 I think EasyJet has finally received a negative reaction to the “lets see how far we can get” price hikes between 2003-2006 as Easyjet share price was hit by lower than expected “occupancy” and EasyJet have been having lots of sales in 2007 to boost “occupancy” (the factors in EasyJet’s “official” explanation would contribute some, but I believe the factors I mention above are a major contributor)

- Also interesting to note Ryan Air has decided to “kick-em when they are down” with aggressive pricing

- Rising energy prices between 2003 and 2006 will have pushed up prices but not to the level of nearly 100% fare price increases on some routes (EasyJet’s treasurer should have hedged out energy price risk anyway so that they could have been safe setting “floor” prices)

- If EasyJet really did want to engage their customers in dialog, they might have turned non profitable routes into profitable ones rather than irritate customers

In conclusion……

Perhaps if EasyJet invested in better pricing engine technology they might be able to price in real time taking into account all factors across all routes: fuel hedged price; availability; fixed cost base; seasonality; landing slot pricing; estimated time on the ground (which costs money); customers in-flight buying habits; seat availability; and net operating profit target for EasyJet; therefore….

The customer would gain a more “consistent” and less “dis-honorable” price to and possibly might up the EasyJet share price to invest in other areas….

Potentially invest a little more on Customer Service (I would pay 1 GBP more per ticket for better customer service; how about this as an idea – “customer services credits” based on total spend with EasyJet and “credits purchased” – I am sure other would as well; just like some people are prepared to pay for speedy boarding perhaps?)

But then – you do get what you pay for and Gordon Ramsey doesn’t work at Burger King…

2nd photo from the left

The second photo from left above was taken last year when we did a 400km charity ride from London to Reims – thank you to all my sponsors last year.

Well, I am now money raising mode for this years ride which I have been organising – Marseilles to Monaco. If you are feeling generous and would like to donate to the Breast Cancer Care charity, then please use my JustGiving.com page for this year here.

If as a corporate you would like sponsor the ride, please see the Corporate Sponsorship benefits section.

Please give generously

Tracking and hunting elephants

A piece of functionality that I have never yet seen elegantly handled by CRM technology is tracking a customer / contact as they progress their careers across various organisations.

Why is it important? well, tracking customer loyalty and repeat buyers; basically important customers; cash in the back pocket!

Today’s experience…

- I asked a software vendor if I could transfer my PC license to the Mac version as I have banished PC’s from the house

- the software vendor should have my name on CRM from three firms and as being a larger license buyer at one of those firms

- I have a very unique name, therefore something should have twigged

- They responded that I had to buy a completely new license

- I had to write to them a “do you know who I am” email (which I hate doing)

- Then they gave me a free license so I remain exceedingly happy customer and will obviously buy again (that’s true as I love the software)

A real problem for firms to handle….

- “systemising” the mobility of trust and buying relationships

- motivating (paying) sales people to track their relationships / contacts across organisations

- assigning accountability for maintaining this data

- the problem gets almost exponentially harder with common names

- is it achievable?

Do I have an answer? well……. honest response is no! as the key problem here is the general psychological make up of sales people and the conflict of need between the “corporate systemised memory” and the sales person to focus on selling and not data admin. Basically, we can have perfect CRM systems which get stuffed by squidgy things called human beings.

One of the most eloquent speakers on CRM topics like the above is my colleague Axel and I hope to prompt him into responding here

Over to you Herr Thill…

Little hydrogen holds planet to ransom

Had a very interesting discussion yesterday on fuel cells with colleague and closet scientist Sigurd and his colleague Arkady Malakhov – I was being educated on the benefits of solid cell fuel cells.

One of the topics we were discussing was the distribution infrastructure of different fuels feeding fuel cells – e.g. hydrogen, propane, syngas.

The propane (also called LPG) distribution network exists today in many parts of the world so fuel cells that use this as a fuel source can benefit.

The benefit to the end consumer is that; the fuel cells are much more efficient than a normal generator so 1 unit of propane fuel yields more power (kilowatt hours); and a fuel cell has minimal moving parts so ops costs / reliability are increased. The downside is that propane is a hydrocarbon and normally generated from processing of natural gas / petroleum.

Another source of fuel is methanol, which can be generated as a bio fuel from various feed crops. The issue here is that there is no “methanol” distribution infrastructure in place (except in very small bottles) and the bio-fuel industry is nascent and just really getting of the ground (some may say stumbling if you look at the Verbio share price). One key point is we would probably need several “planets” of crops to provide our total bio-fuel needs (I exaggerate to make the point).

However, propane is generally only used to produce “syngas” which the fuel cell actually uses to function.

Syn-gas a non-naturally occurring gas which interestingly can be generated from agricultural waste (pig s**t to you and me) – so a fuel cell with a fuel requirement of syn-gas (pig s**t) would be a useful device and help reduce our reliance on oil/gas reserves for a specific market.

Now to the “ransom note” – the main feeder fuel for fuel cells is hydrogen a very basic gas consisting of just two hydrogen molecules – what can be simpler than that?. Why then is hydrogen holding the planet to ransom?

If hydrogen distribution infrastructure existed, we might have fuel cells in every house / building (fuel cell technology permitting) and cars running on fuel cells

Hydrogen has less “power to weight” (kilowatt hours to weight) ratio than propane so for bottled distribution has to be more compressed into liquid form around 5 times as much as propane, hence requiring much more substantial (read impractical) containers

Fuel cells needing hydrogen require a feed of pure hydrogen. This is where the little molecule really upsets us. Hydrogen loves leeching into anything and everything (inert substances excepted) so distributing pure hydrogen is a chemist’s and material scientist’s nightmare (or research funding source).

So fundamentally hydrogen is teasing us, resulting in today’s market recommendations are:

go long on curry houses
go long on farms (I wonder when the first cow and grain based power station will be listed on AIM?)
go long on moon or mars farming

This is not as silly as it sounds as I know of a group of investors who have invested in farm s**t power generating and carbon trading infrastructure in South America (one used to be on BP’s main board!)

Will global warming end up a profit chill?

Interesting to note the trend of firms (Terra Firma and EDF) spinning off their renewable / sustainable business units to ride the “green wave”

Whilst I am a firm believer in and supporter of the renewable energy / sustainable living movement, my markets head does keep whispering in my ear “beware of tulips”

Power Plant in the garden – are there seeds?

One interest I have is the whole aspect of “off-grid living” where your resource requirements (electricity, water supply, water re-cycling) are provided from “local” renewable/sustainable sources.

It was interesting to read the recent press release from Ceres Power and EDF to collaborate to produce an “in your garden fuel cell”.

Having your own power source (technology / infrastructure issues permitting – e.g. hydrogen supply, batteries etc.) in your garden whilst also being connected to the grid does open up all sorts of topics:

What will happen to the share price of energy suppliers?

Will energy suppliers become energy infrastructure suppliers?

Will “micro-energy-trading” platform’s pop up?

Wait and see…

Turning 40

Well I finally made it to 40 the other day and have to make a decision on whether to return back to the corporate world or completely change direction.

Having had some time off recently I tend to agree with Sean’s observations (I used to work for Sean).

Somehow employers and employees should look at devising a sensible approach for people to take sabbaticals every X years without impacting corporate productivity or the individual feeling that their job is under threat. I have a “back of the envelope” hunch that this would lead to increased productivity and more sense of “self worth” – especially in larger firms. Will look into research in this areas as there are immediate issues which spring to mind (e.g. lock in’s etc.).