http://www.xbridge.com/articles_by_xbridgers/ en Copyright 2008 Sat, 01 Mar 2008 13:14:27 +0000 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss Microsoft’s proposed acquisition of Yahoo is reminiscent of the consolidation in the newspaper industry over the last few decades — combining traditional media businesses together to achieve efficiencies and consolidate market share. The problem lies in the vision (or lack thereof) for the newly combined business. Without a coherent vision, the combined web-based businesses will not be viable long-term against competitors like Google. The main issue with the Microsoft and Yahoo combination is that in the online channel, they are both traditional media companies. Both rely on closed, centralised control models — rather than open, distributed network models. Both Yahoo and MSN control content, market to bring in audiences, and then inundate them with ads. Few Yahoo and MSN products are constructed so that their content can be shared with others. This closed model makes both Yahoo and MSN traditional, old style media. The web will increasingly be dominated by media – particularly user-generated media – served via open, distributed networks. And while Yahoo has some interesting distributed network properties – like Flickr and Yahoo Answers – such properties are not coherently integrated. Only recently – after co-founder Jerry Yang replaced former movie studio boss Terry Semel as CEO – has Yahoo moved toward sharing more of its content via open, distributed platforms. This new strategy came too late to stem a two-year drift in stock price – precipitating the acquisition bid by Microsoft. Microsoft has fared no better in the online channel. Arguably Microsoft should understand better than others the power of network effects. The company used such to create both its monopolies in PC operating systems and desktop software – but both monopolies were built using old-style, closed networks. The company still lacks a single online application that dominates via an open, distributed network the way that Google does with contextual ads and video (via YouTube). MSN’s most successful products – Hotmail and Messenger – run on traditional, closed platforms. Both companies are therefore not aligned with the grain of today’s web, which is fundamentally an open, distributed network. As such, they do not benefit online from network effects, which is precisely what powers Google — and why open platforms will likely beat those offered by a combined Microsoft/Yahoo. Online media used to be about centralised, tightly controlled silos. Now it’s about loosely affiliated, open and distributed networks. The type of traditional media business thinking that drive Microsoft and (until very recently) Yahoo is difficult to break. What drives the success of Google and other newer style media companies is completely counter-intuitive from the perspective of what drives traditional media businesses. The future of the web will belong to companies that open their platforms to create network effects — and particularly to those that can become the network itself. Older business like Microsoft and Yahoo can evolve and survive online, by only through a radical change in thinking. Such radical change, not consolidation, will better guarantee their future. http://www.xbridge.com/articles_by_xbridgers/2008/03/does_microsofts_acquisition_of.html http://www.xbridge.com/articles_by_xbridgers/2008/03/does_microsofts_acquisition_of.html Sat, 01 Mar 2008 13:14:27 +0000 The vaunted credit crunch is firmly upon us. There is much in the press about how global financial institutions are affected, but little about the effects on our own industry. While not as dramatic as the multi-billion pound losses reported by international banks, there are three key ways lenders in our industry have changed their underwriting practices in recent months. Traditional lenders to the business customers of Simply Business have broadly tightened requirements for unsecured lending, and overdrafts in particular. Our business customers are finding it more difficult both to obtain and to increase the size of overdrafts. At the same time, more businesses are being invited to look at invoice finance as a substitute to fund working capital needs. Similarly, many providers of invoice finance are also tightening underwriting criteria. Others are enforcing existing underwriting guidelines more strictly. This has created more customer enquiries from businesses seeking to switch to new, more flexible (or lenient) lenders. Other asset-backed lending criteria are also tightening. This is especially obvious with commercial property, where loan to value ratios are steadily shrinking as lenders worry about the declining value of such assets. Where a particular lender might have lent 80 percent of appraised value a few months ago, 70 percent is now more the norm. So what does this mean for our industry? Taking a positive viewpoint, the tightening of commercial credit presents an opportunity for specialist lenders which take a long-term point of view. More businesses will seek alternatives to their existing lenders this year than in the past. Accordingly the opportunity to grow market share is now bigger than in past years. Moreover the long, historical declines in pricing for commercial credit should slow (and possibly reverse) during 2008. As lenders’ costs of funds rise and underwriting criteria firm, fewer potential customers will be lost to competitors because of pricing issues. Conversely, service and flexibility will increase in importance for winning such new customers. This year is a real opportunity for the asset backed lending industry to capture market share – both from other asset backed lenders and especially from unsecured commercial lending products. Growth in both the number of customers and the share of lending that is asset-backed could accelerate. 2008 presents a real opportunity for savvy (and brave) asset-backed lenders with a long-term view. More businesses will seek alternative financiers this year than in the past. Pricing will be firmer; competition diminished. This will be a year where the market shares amongst lenders will shift more than in the past. For the strongest and the bravest, 2008 will be a year of opportunity. http://www.xbridge.com/articles_by_xbridgers/2008/01/how_is_the_credit_crunch_affec.html http://www.xbridge.com/articles_by_xbridgers/2008/01/how_is_the_credit_crunch_affec.html Tue, 29 Jan 2008 12:24:02 +0000 Harness collective intelligence. Crowds are smarter than individuals. Web 2.0 companies benefit from the network effects of user contributions to create market dominance. Think Wikipedia instead of Encyclopaedia Britannica. Leverage the “long tail”. The “long tail” refers to the tiny sub-markets that exist at the outer reaches of a bell curve that outlines all market opportunities. Web 2.0 companies leverage customer self-service and data management to create a product that is useful for everyone, not just the big markets that reside underneath the peak of a bell curve. Think of the mass retailing strategy of eBay instead of Marks & Spencer. eBay, via its vast network of sellers, has something for everyone; but delivers it without the need for salespeople. Software is delivered as a service. Few Web 2.0 companies rely upon specific devices or packaged software. Instead, web browsers deliver their services. Think Google Apps instead of Microsoft Office. There is no software to download or update. Your files are stored on Google’s servers. You can work on a document or spreadsheet collaboratively with anyone you choose – anywhere in the world. Data is at the core. The best Web 2.0 companies are data driven. Large databases are constantly updated and grown by customers. Sophisticated, proprietary algorithms manipulate this data to both improve and personalise the customer experience. Think Amazon, whose bibliographic data – constantly enhanced both by both customers and publishers – far surpasses the quality of any other source. Trust users as co-developers of the product. Anyone can now develop a new application for Facebook. And over 3,000 have since the company opened their platform in May. You do not need permission from Facebook and there is no agreement to sign. Users of the platform decide what else Facebook needs and develop it for others. Allowing anybody to develop new applications both significantly accelerated Facebook’s growth and greatly enhanced the Facebook customer experience. Successful Web 2.0 companies are fanatical about leveraging technology in smart ways to create a better customer experience. This is a lesson that can be applied to any company. ]]> http://www.xbridge.com/articles_by_xbridgers/2007/11/what_is_web_20.html http://www.xbridge.com/articles_by_xbridgers/2007/11/what_is_web_20.html Thu, 29 Nov 2007 12:10:34 +0000 Most of us have seen the late night adverts for secured loans. Significantly, these adverts don't sell the mundane features of the loan such as interest rates or monthly payments. Instead they help potential customers visualise the benefits of taking a second charge on their home. They are full of imagery: holidays to sunny beaches, flat screen televisions and dazzling kitchen extensions. They encourage home owners to create a luxurious new lifestyle free of credit card bills. One lender has gone so far as to brand themselves "Picture the Loan". Why as an industry do we not do more to help entrepreneurs visualise the many benefits of factoring? The secured loan industry does not sell on price. Neither should we. The receivables finance industry has far more benefits from which to create effective marketing campaigns that can help drive home the many benefits of factoring. Here are some ideas for a series of factoring ads that target aspiring business owners: • Andy Wiseman, a recruitment consultant, decides to follow the example of his friend Tony Broke and leaves Temp Staff PLC to set up on his own. He lacks the security for a conventional bank loan or overdraft. He secures a factoring facility with a working capital line at start-up that automatically grows in proportion to his company's turnover. • Our newly minted entrepreneur wants to compete for a big contract with Giant PLC that pays its suppliers in 40 days. Andy competes and wins the contract, knowing he will be able to pay his staff weekly, while trading on the extended credit terms demanded by this important new customer. • Our hero is having lunch with his former colleague. Tony is complaining about the cost of hiring a new controller and bookkeeper to keep up with the billing and payment collection for his growing business. Andy explains how he avoided such costs via sales ledger management features of his factoring line. After lunch our hero is seen making a new business pitch while Tony argues with his new hires about how to collect mounting receivables. • A large client delays paying a big invoice, threatening the viability of our hero’s business. But Andy’s factor’s credit controllers spot the issue quickly and liaise with specialist solicitors who initiate legal action, get the invoice paid, and save the company from bankruptcy. • Giant PLC, who takes staff from both Andy and Tony’s agencies, goes out of business. Hundreds of companies are left with unpaid debts. Tony goes out of business. Because Andy opted to insure his ledger, our hero’s business continues to grow. Andy is seen collecting an award from his local business community as the ad fades. Factoring should be the automatic choice for an entrepreneurial business that does business with other businesses. Helping potential customers picture the many benefits of our product is a way to help both their enterprises and our sector grow. By creating a vision of aspiration, we can expand the market for invoice finance. http://www.xbridge.com/articles_by_xbridgers/2007/07/a_new_vision_for_factoring.html http://www.xbridge.com/articles_by_xbridgers/2007/07/a_new_vision_for_factoring.html Mon, 02 Jul 2007 15:37:44 +0000 1. The open forum: regular meetings between sales and operational managers to communicate issues and provide an open forum where issues can be addressed with appropriate policies and measures. If the Risk Director chairs the meeting it can prevent individual prejudices from creeping into the credit policy for the organisation. 2. Joint visits to prospects: underwriters can be included early in the sales process, particularly for larger deals. This can provide an early opportunity for the underwriter to form an objective opinion of the prospect based on more than the report created by the salesman. The prospect is also more engaged with a broader range of the organisation’s people, making him potentially more receptive to any additional conditions required to complete in the deal. 3. Pre-underwriting: this approach has the advantage that the deal has already become something acceptable (at least in principle) to underwriters. The salesperson can now present to a potential client, confident that she can deliver the deal. The salesperson is also more productive, focused more positively on closing the deal, rather than information gathering. 4. Delegated authority to salespeople: an approach that shortens the sales cycle for some lenders. Its effectiveness depends upon the ability and competency of individual salespeople. It has the positive effect of establishing a stronger bond of trust between sales and underwriting, but requires more careful management and nurturing of individual salespeople. 5. Sector reviews: analysis comparing conversion rates by sector and drilling deeply into sectors where conversion may be substandard. Individual deals are presented as case studies to a team of underwriters who discuss how and under what conditions failed deals might have been underwritten. New policies for the sector often emerge. There is no magic formula for bridging the gap between Sales and Underwriting. The above techniques can help facilitate improved communication. Successfully implemented, they can create a partnership of genuine long term value between Sales and Underwriting.]]> http://www.xbridge.com/articles_by_xbridgers/2007/05/underwriting_and_sales_bridgin.html http://www.xbridge.com/articles_by_xbridgers/2007/05/underwriting_and_sales_bridgin.html Wed, 02 May 2007 15:35:19 +0000 Each month UK invoice finance brokers generate lots of prospective customers in industry sectors that are poorly served by our industry. For example in the first quarter of 2007, over 150 construction companies with an average turnover in excess of £1 million per annum came to Xbridge’s Simply Business brokerage seeking invoice finance. Unfortunately, only one UK lender has enough construction industry expertise to effectively handle such prospective customers. Recent changes to HMRC’s Construction Industry Scheme (CIS) make it even tougher to underwrite invoice finance facilities in this sector. Forward thinking factors should view these changes as an opportunity to develop an industry niche and take business away from those more complacent. Until recently, construction companies operated under a CIS 4, 5 or 6 certification: granted by HMRC depending upon their individual track records. This certification determines the rate of tax they must deduct (or not) from payments to sub-contractors, as well as the corresponding percentage of funds a factor is prepared advance on an invoice. The most significant change in the new CIS scheme is HMRC’s ability to change the certification status (i.e. whether an invoice is paid gross or net of tax) during the course of a company’s relationship with a subcontractor as a penalty for late payment by the subcontractor. Naturally, the potentially dynamic changes in certification status make the level of security in a subcontractors’ invoices more unpredictable – and harder to underwrite. The changes also hinder the efficient collection during insolvency. In the past this issue could be mitigated by the ability of the factor or discounter holding a debenture, to instruct an insolvency practitioner to collect payments. Under the new changes insolvency practitioners no longer have a special status to obtain payments without deduction and are subject to the payment status of the subcontractor prior to failure. Although the new CIS scheme presents challenges, the increased complexity should be viewed as an opportunity for agile funders willing to develop specialist industry expertise. Such lenders will enjoy a highly favourable competitive environment. Brokers such as Simply Business, Factoring UK and Hilton-Baird will jump at working with such specialists and provide plenty of new business. For clever lenders, the CIS changes are an opportunity to capture market share in an important and rapidly growing industry sector. Construction is just one industry sector where specialisation makes sense. As a broker, we would like far more lenders to specialise in industries that are widely regarded as challenging. Opportunities for innovatively underwriting exist in the telecoms, technology and in most service sectors. As discussed in my November column, lenders that today continue to focus on “vanilla” deals are missing important opportunities. Whether you are an independent factor or a large bank, specialisation and competitive differentiation are key to maintaining healthy margins. Those who differentiate themselves from competitors and view the underwriting challenges in these industries as competitive opportunities will flourish. http://www.xbridge.com/articles_by_xbridgers/2007/04/specialise_and_prosper.html http://www.xbridge.com/articles_by_xbridgers/2007/04/specialise_and_prosper.html Mon, 02 Apr 2007 15:33:39 +0000 1. Revoke the 5-year limit. All participants agreed that placing an arbitrary 5-year limit on the age of companies eligible for the scheme significantly limited its purpose: to promote an enterprise culture in the UK. The 5-year limitation was a December 2005 change to the SFLG scheme. Everyone agreed that it should not have been implemented. 2. Increase the guarantee to 85% for smaller loans. The comparable US programme guarantees 85% of the loan up to $250,000 maximum, compared to the UK’s 75%. Most participants agreed that UK taxpayers would receive good “value for money” with such an enhanced guarantee. Lenders would be able to lend more because their risk would be reduced by 40% on these loans, and this would encourage the formation of new business. 3. Establish clearer guidelines for eligibility. Most agreed that current eligibility rules are confusing for both borrower and lenders. Much time is often wasted during the SFLG application confirming that a business is eligible. Clearer, simpler guidelines would reduce potential for confusion for both lender and borrower, making the programme more attractive to both. 4. Allow SFLG lenders to seek a personal guarantee. SFLG lenders are not currently allowed to seek a personal guarantee from the borrower. This point was a bit more controversial, but most agreed that having “a bit of skin in the game” would reduce the SFLG’s notoriously high default rate, enabling the government to loosen other lending requirements and therefore provide more guaranteed funding. The roundtable participants discussed limiting the personal guarantee such that it excludes the entrepreneurs’ home. This is similar to the level of protection and commitment between a lender and borrower on most loans in the US. The above recommendations would significantly improve the current SFLG programme and would better promote an enterprise culture in the UK. I am not, however, convinced that the above steps go far enough. In next months column I plan to suggest a more radical and I believe more effective alternative to the current SFLG scheme. ]]> http://www.xbridge.com/articles_by_xbridgers/2007/03/promoting_better_access_to_fin.html http://www.xbridge.com/articles_by_xbridgers/2007/03/promoting_better_access_to_fin.html Fri, 02 Mar 2007 15:29:16 +0000 Move the determination of eligibility to the lenders. If there are clear and concise guidelines (as above) there should be no ambiguity about whether a particular company is eligible or not. Such determination can take weeks under the SFLG. Such delays and uncertainties increase hassles for both SFLG lenders and borrowers. By contrast, the SBA monitors and vets lenders -- not individual borrowers – a much more efficient way of administering such a programme. 2. Broaden eligibility for the scheme. The SFLG bills itself as “lender of last resort”. By contract, the US proudly boasts its role as “lender of first resort”. Almost every small business in the US is eligible to participate. Getting an SBA-backed loan depends simply on finding one of 5,000 SBA-authorised lenders who is willing to risk loosing the 20% portion of a loan that is not guaranteed. This diversifies the portfolio so that most borrowing businesses are good credit risks. 3. Require a personal guarantee for every loan. The current SFLG scheme does not allow personal guarantees. The US scheme requires them for every loan. That is a key reason the US scheme has a default rate that is probably about one-sixth that of the SFLG. 4. Allow SFLG lenders to seek collateral. The SFLG does not currently allow borrowers to pledge collateral to secure the loan. This fact, combined with the lack of personal guarantee, significantly increases the risk profile of a typical SFLG loan. By contract, SBA lenders can accept virtually any asset as security – just like any other commercial loan. 5. Impose a maximum interest rate. There is technically no limit to the rate charged under the SFLG. SBA loans over $50,000 are capped at 2.75% over the prime rate. This cap both encourages lenders to take only prudent credit risks and reduces the cost of the programme for SBA borrowers. The UK should learn from the enormous success of the US programme and adopt the above. They are radical changes, but changes that would also dramatically improve access to finance for UK businesses without additional cost to the UK taxpayer. ]]> http://www.xbridge.com/articles_by_xbridgers/2007/02/a_new_pathway_for_the_sflg.html http://www.xbridge.com/articles_by_xbridgers/2007/02/a_new_pathway_for_the_sflg.html Fri, 02 Feb 2007 15:25:34 +0000 The Vanilla Deal of the Past The industry has long offered facilities with an 80% advance rate to customers who traded in well-understood, highly factorable industries. The traditional Vanilla Deal has no staged payments, little seasonality, low debtor concentration or other complications. Advances in technology and better sector-specific knowledge have transformed the Vanilla Deal. While still "vanilla" in its base, today's invoice finance facility is more typically has added ingredients lacking in the traditional Vanilla Deal. The New "Cherry-Vanilla" Factors are enticing new customers with high advance rates (or "cherries"). Cherry-Vanilla is increasingly offered within the industry's most traditional sectors where factors are comfortable managing well-established sets of risks. Increasingly technology is turning cumbersome paper trails for validating invoices into more efficient "e-trails", enabling faster and more efficient lending against such electronic documentation. Formerly, a customer might wait up to a month to access Proof of Delivery (PoD) from a courier. Today PoD's can be viewed online and in real time, increasing transparency. In turn, customers are demanding higher advance rates. Such customers now typically seek 90% advance rates. And a few specialist factors will advance as much as 100% in the recruitment sector. Customers formerly contented with vanilla now require a healthy dose of "cherries" (in the form of higher advance rates) to make the facility palatable. The "Tutti-Fruity" Tutti-Fruity is a Vanilla Deal with lots of chewy bits to get an underwriter's teeth around. As lending in traditional sectors becomes more competitive, progressive lenders are harnessing technology to explore and develop competitive niches in less traditionally factorable industries. Through a combination of sector knowledge and technology, the specialist financier caters to sector "quirks" such as (in the construction sector) CIS status, staged payments and JCT contracts. Where seasonality is an issue, advance rates can be adjusted to allow for seasonal dilution. Such systems reduce attrition as facilities are tailored more precisely to a business's cash flow requirements. Although still "vanilla" at its base, learning to service the chewy bits yields strong competitive benefits for lenders with a more developed palate. Vanilla Yogurt Yogurt is the ice cream for a newer generation of customers. New Economy sectors such as technology, media and telecoms increasingly seek invoice finance. A few far-sighted lenders are developing specialisations in such areas -- developing the expertise to comfortably lend in sectors with non-traditional invoicing practices. The commercial potential is enormous; as such sectors of the economy are growing far more quickly than traditionally factorable sectors. The Vanilla Deal is not dead. But it requires more creative recipes from increasingly sophisticated lenders. Some new ingredients are an acquired taste -- unpalatable without enhanced, sector-specific knowledge and the judicious application of technology. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/11/is_the_vanilla_deal_dead.html http://www.xbridge.com/articles_by_xbridgers/2006/11/is_the_vanilla_deal_dead.html Wed, 01 Nov 2006 10:01:19 +0000 The Customer of the Future by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, October 2006 The concept of 'The Customer' is changing at an unprecedented rate. Information technology, led by the Internet, is making the exchange of information faster and more efficient. With it, the development of the consumer as an informed and discerning purchaser of goods and services continues to evolve. 1995-2005: Centralised Information Exchange During the last ten years, the Internet helped drive transparency in pricing. Aggregators like Xbridge displayed comparative pricing, resulting in better informed customers. These customers are now accustomed to comparing prices using online aggregators that display accurate prices and constantly update product offerings. Increasingly, customers are seeking to compare other elements than pricing. Customers now compare the minimum length of contract, termination fees, and other important contractual terms. Customers don't yet have an elegant mechanism for comparing the most important element of a commercial finance facility - customer service. This will change shortly during the next evolution of the Internet. 2006-2012: Peer to Peer & the Empowered Consumer We have recently witnessed an explosion in decentralised Internet communication, enabling anybody to make a contribution or share an opinion with everybody. This has been facilitated by more interactive software platforms and the mass adoption of broadband technology. Recent examples of empowered consumers: In July an AOL employee was fired after being recorded handling a customer service call poorly. The call was recorded and posted online causing millions of pounds of brand damage to the Internet division of Time Warner In August a video of a Comcast employee filmed sleeping when he should have been installing a cable line video was posted on YouTube.com, the online consumer media company. Comcast aggravated the matter by attempting to block their own subscribers from accessing the video. In September a frustrated employee of Lockheed Martin posted to YouTube a video highlighting safety problems with military orders after being ignored by both superiors and government officials. Online whistle-blowing was born. The message? "If you do not provide me with a service I think is appropriate I will tell my network of friends why they should not do business with you and they will tell their friends." Focus on The Customer is the way forward Over the next several years the Empowered Customer will gain a new and powerful voice. The above incidents are only the beginning. Each year, your current (and former) customers will find increasingly efficient ways via the Internet to vocalise opinions about the quality of service you provide. New business models will develop to provide your customers this voice, aggregating feedback and reviews from your customers and rating your business relative to your competitors. Customer-centric companies will welcome this change. Their growth (already high) will accelerate because their customers find more and better ways to share their satisfaction. Other companies will find the era of the Empowered Customer extremely challenging. Customer acquisition will slowly or perhaps suddenly (depending on how bad the organisation's approach is) dry up as potential customers gravitate towards more customer-centric competitors. Which type of company will you be? I would like your thoughts or experiences on the 'customer of the future. Feel free to drop me a line at ceo@xbridge.com. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/10/the_customer_of_the_future_1.html http://www.xbridge.com/articles_by_xbridgers/2006/10/the_customer_of_the_future_1.html Mon, 02 Oct 2006 15:18:59 +0000 Microsoft versus Google: What does it mean for you? by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, September 2006 There has been much press lately about the looming battle between Microsoft and Google. Microsoft finally has real competition. Google wants to dominate your desktop - a position that Microsoft has monopolised the last three decades. Dominating your desktop enables a company to charge what economists call "monopolistic rents". Microsoft earns $17 billion on turnover of $40 billion from its monopoly - a 43 percent after-tax profit margin! By comparison, Google currently earns about $2 billion of profits from $6 billion of annual turnover. The company that controls the desktop is also able to bundle other services and create other monopolies. Think Microsoft's Office software or Internet Explorer browser. Microsoft won the last full-scale battle in the technology industry, handily beating Netscape in the "browser wars" of the mid-1990s. This battle will be different. Then Microsoft had a home-turf advantage, competing on the hard drive of the PC but this battle will take place on the networked world of Internet.Google's home turf. Both companies recognise that the software inside your PC is becoming less important. Both seek to deliver Software as Services (or SAS). SAS enables customers to choose exactly which products they want but also which components of products they want. Updates are automatic and delivery immediate. Salesforce.com is a very successful SAS for sales force productivity. It now dominates many market niches in the US (although UK bank penetration has been surprisingly low). Companies that use Salesforce instead of Goldmine, ACT or SalesLogix have no software or servers to maintain. Customers pay only for the functionality they want, rather for functionality they will never use. By contrast, Microsoft launched Excel in 199[x] as a 3 MB programme. Excel is now a 75 MB programme, although must customers don't use more than 3MB of its capability. Domination of the desktop via SAS is the vision of both Google and Microsoft. Google's vision has always been to organise the world's information and therefore it wants deliver everything the user needs via the Internet. Download the Beta version of Google Desktop to gain a clearer view of this vision. Highly customised information is aggregated from many sources (including your PC) and efficiently pushed to your desktop. Microsoft recognises the model that has served them so well over the last decades must change. The advantage once gained from having its products preloaded on every boxed PC will no longer apply in a world where bespoke products are delivered through the network. Bill Gates has now taken a back seat in driving company strategy in favour Ray Ozzie, the original developer of Lotus Notes. Lotus Notes pioneered the idea of working collaboratively and leveraging the power of a networked software application. As peer-to-peer networks have become important for entertainment (e.g., MySpace, Bebo, YouTube), so will such networks for businesses. The commercial finance industry can apply this to our own industry. Those who offer highly tailored, flexible products can exploit niches that less flexible underwriters cannot (or will not). In the end, it is all about efficiently delivering what the customer wants. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/09/microsoft_versus_google_what_d.html http://www.xbridge.com/articles_by_xbridgers/2006/09/microsoft_versus_google_what_d.html Sat, 02 Sep 2006 15:17:00 +0000 Web 2.0: Your Customer Finds His Voice by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, June 2006 The Internet is now entering a new phase in its development. Labelled "Web 2.0" by pundits, it will transform the way your customers choose business partners, suppliers and lenders. In the past, your customers used the Internet to gain transparency in pricing between various lenders. Web 2.0 harnesses the social networking capabilities of the Internet to enable your potential customers to understand how existing and former customers feel about the service they receive from your organisation. This will have an enormous impact on your ability to compete for new business. Your customers will soon be able to go online to websites that aggregate customer reviews (such as Google and Yahoo) and read reviews written by your customers and former customers. No longer will an aggravated customer be left to vent frustration only to friends and family. Soon aggrieved customers and former customers will have an outlet to efficiently share their issues with your service to the entire world. The implications of this development will be particularly important for service-intensive industries such as invoice finance. Factors who diligently focus on fair, transparent pricing and customer service will garner an enormous competitive advantage as loyal customers post positive online reviews of service. BDMs will in turn prompt potential customers to go online and read the glowing customer feedback. Potential customers will be comforted that they are making the right choice in selecting the factor that has demonstrably cultivated loyal customers. On the other hand, factors who focus on optimising revenues at the expense of their customers will find an increasing and considerable lack of interest from prospective customers. Such potential customers will read the horror stories of clients who were forced to live with 36 month contracts or who paid an egregiously high termination fee. In June, a phone conversation recorded by a frustrated AOL customer trying to cancel his service was posted to such a website in the US. Within days, the recording was downloaded by millions, featured on CNN and CNBC, and parodied by late night comedians. The damage to AOL's reputation was swift and irreparable. The invoice finance industry has a long way to go toward improving customer service. Joint research conducted by Xbridge and the Factors and Discounters Association indicates that 70 percent of invoice finance customers are ambivalent about the service provided by their factor. Twenty percent are aggravated, and only about 10 percent are satisfied enough to proactively recommend the factor to others. At Business Money's Small Factors Conference, many were surprised when I announced that Xbridge had reduced the panel of factors on our marketplaces from 22 to 17 because five factors were unable to deliver adequate levels of service. Such paring is likely to continue. The industry must focus on service quality and delivery if it is to grow to its full potential. Over time, service levels will prove to be the ultimate differentiator between lenders. And your customers will become your marketing department. Far-sighted lenders will focus now in influencing the message their customers will deliver. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/06/web_20_your_customer_finds_his.html http://www.xbridge.com/articles_by_xbridgers/2006/06/web_20_your_customer_finds_his.html Fri, 02 Jun 2006 15:15:35 +0000 Leadership Requires Innovation by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, April 2006 The World Economic Forum ("WEF") recently released its annual report naming the world's most IT-effective nations. That the United States once again garnered the top ranking was no surprise. What is astonishing is that since 1995, the rate of growth in economic productivity of the world's largest economy has steadily accelerated. The report, co-authored by INSEAD, directly attributed the US acceleration in economic productivity with the country's ability to participate in and benefit from developments in information communication technologies. The US scored impressively higher than the other smaller nations that followed in the rankings - including Singapore, Denmark, Iceland and Finland -- confounding the usual notion that size slows agility. Interestingly, these are the same "top 5" nations named by the WEF last year. Sadly (as I am now proudly a citizen of this 'fair isle') the UK only managed tenth place. Prosperity is now linked at least as much to investments in human capital and technology as it is to investments in physical assets and infrastructure. The UK government knows this but has not executed its policies to promote such investments in people and technology as well as those of smaller nations and the US. The WEF report cited three key reasons why US continues to lead in technological innovation: Management practices. US firms are managed differently than their non-US peers. Management techniques that the WEF cited that helped US companies generate a much greater return on investment include: stronger decentralised management practises, a culture of stronger worker incentives, smarter targets and leaner manufacturing. Venture capital. The availability of venture capital in the US, and early-stage venture capital in particular, is unmatched by other economies. This is a key contributor to the success of new start ups pioneering innovative new technologies. In comparison, British venture capitalists lend one-fourth as much as their US counterparts relative to each country's GDP. More poignantly, the combined membership of the British Venture Capital Association fund only about 150 of 450,000 UK business entities that start up every year. Higher education. US universities don't just lead in technological innovation; they actively seek to enable the commercialization of their innovations. The WEF report cited unmatched levels of cooperation between US institutions of higher education and the US business community. Innovations move swiftly from university labs into business models for young, innovative companies. Hewlett Packard, Yahoo!, and Google were all founded by students at a single American university (Stanford). As an entrepreneur doing business in both the US and UK, I would cite one additional factor: a fundamental difference in the attitude towards change between the US and Europe. More US companies have adopted innovation as a foundation to create and maintain competitiveness. How many UK companies outside of the pharmaceutical or technology industries have the word "innovation" in their core values? How many have management systems in place for accelerating innovation and systems for rewarding employees for new innovations? Enhancing one's competitive advantage isn't just about investing in physical infrastructure. It starts with developing a culture that embraces and champions change. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/04/leadership_requires_innovation.html http://www.xbridge.com/articles_by_xbridgers/2006/04/leadership_requires_innovation.html Sun, 02 Apr 2006 15:13:20 +0000 The Future of Invoice Finance? by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, March 2006 We now live in a New World - a world where the Internet serves customers as a powerful tool to research and find the best products from the most appropriate lender. And those lenders who adapt to meet customer needs will thrive in this New World where customers increasingly depend on the Internet to help them make sound decisions. The invoice finance industry of the past offered only two products: factoring or discounting. Business development managers told customers which of the two products the customer needed. Customers didn't have sufficient information to question this advice. How times have changed! Business owners using the Internet to research product offerings are becoming more demanding. Factors - led mainly by the Independents -- have responded by increasingly offering products such as CHOCS, confidential factoring and disclosed discounting facilities. Discounting is now offered to companies with a turnover as low as £250,000. One-year contracts are being replaced by trial periods. Good rates and service are no longer enough. Factors must have a broader spectrum of products to meet the demands of increasingly better educated customers. Split ledger facilities are an emerging industry trend. Such facilities are ideal for companies in industries such as construction and technology services. Split facilities can placate underwriters uncomfortable with such complications as staged payments and maintenance contracts. Customers mix the benefits of factoring and discounting to ensure they obtain a superior product at a better overall price. The natural evolution of split ledger facilities will be for customers to have multiple facilities in place - each for a particular part of their ledger. Public sector debt will be factored by a specialist; export debt with a different specialist; and "vanilla" debt with a more traditional factor (competing primarily on rate). Customers with multiple facilities can dip into and out of each facility as needed. It is conceivable that in a number of years, even smaller businesses will go online and put up for tender single debtors, specific projects, and perhaps even individual invoices. Ledgers will be divided into pieces to make them most attractive to the individual underwriters of both sector specialists and less specialised lenders with highly competitive rates (and access to cheap capital). Or perhaps a far-sighted bank interested in retaining the overall customer relationship will bundle such multiple facilities and enable this type of flexibility themselves. Precedents already exist where a bank-owned factor passes customers requiring "high touch" levels to an independent factor. While such a future may now seem far-fetched, one only has to remember how much progress has already been made online during the last five years. Today's customer is increasingly using the Internet to become better educated and is demanding more from lenders. The most successful lenders will listen carefully to those demands and create solutions that enable the customer to win. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/03/the_future_of_invoice_finance.html http://www.xbridge.com/articles_by_xbridgers/2006/03/the_future_of_invoice_finance.html Thu, 02 Mar 2006 15:11:28 +0000 Do we all have to be more like Google to succeed? by Brad Liebmann, Managing Director, Xbridge Ltd Business Money, January 2006 A recent poll now asserts that Google is the world's biggest brand. Although the source (brandchannel.com) appears to have a bias in its methodology toward online brands, the claim itself is startling. Even more astonishing is that a start-up company has built £75 billion of shareholder value within the space of only 10 years. Google is now worth more than British Airways, BT, Cadbury Schweppes, Marks & Spencer, Sainsbury and Tesco combined. Google generates £1 million of turnover and £420,000 of cash annually per employee, more than six times than the amount of cash generated per Time Warner employee. So what lessons can we learn from the Google's meteoric rise that might increase value for our own shareholders? Focus on the customer and all else will follow Google has built the most loyal audience on the web. Incredibly, it has created this customer base by word of mouth. Since its founding in 1996, Google has focused on providing the best user experience possible. Its home page is simple and intuitive. Its pages load quickly. Google does not allow ads to be displayed on its results pages unless they're relevant to the results page on which they're shown. It is through this unwavering commitment to the customer that Google has built its formidable brand. It's best to do one thing really well Google is singularly focused on organising the world's information. This unwavering focus is how Google captured the dominant share of search traffic. Its continued focus on this science is why they will continue to grow. Although they are expanding into other related areas, this is all a natural evolution of its key competitive strength - organising information. Fail fast and often Google likes to release new products early and often. In the UK, Google launched its "Google Local" product within two weeks of purchasing the raw data from Yell. Implicit in this approach is a mentality that says "we want to learn from successes and failures and will do so instantly". This sounds brave, chic and thoroughly modern, however in practise it means little more than continuous improvement and embracing positive change. Great isn't good enough No business should accept being the best as an endpoint, but a starting point. Through continuous innovation and iteration, Google takes something that works well and improves upon it. By comparison, Microsoft has been relatively complacent as Google built its dominant position in search and as Google launches new products such as Gmail and Google Desktop that threaten Microsoft's dominance of the desktop. Google faces significant challenges ahead. The recent controversy about China will fade but recent disclosures around "click fraud" will grow over time. Nevertheless, the UK commercial finance industry can learn a great deal from Google's passion to improve upon the status quo and Google's focus on the customer. Both should be driving forces in our industry. ]]> http://www.xbridge.com/articles_by_xbridgers/2006/01/do_we_all_have_to_be_more_like.html http://www.xbridge.com/articles_by_xbridgers/2006/01/do_we_all_have_to_be_more_like.html Mon, 02 Jan 2006 15:08:48 +0000