BusNet Bulletin

A blogger posted an interesting map of the world this week. The country names were rearranged so that the country with the largest population (China, with 19.5% of the world’s population) appeared in the territory with the largest area (Russia), then the next largest population (India) took the next largest territorial area (Canada), and so on. The USA (3^rd) and Brazil (5^th) did not have to move, while Bangladesh moved into India’s territory and Switzerland took its place. Also, North Korea now theoretically shares an even larger border with South Korea, which is worrying for world peace!

The aim of this fictional map is to iron-out the extremes in population density (highest in Monaco at 16,923 per km² and lowest in Mongolia with only 1.7 per km²) so that all countries approached the global average of 13 humans per km². Perhaps unintentionally, Frank Jacobs’ map also reminds us that ‘Geography is Destiny’. Our lives are enriched or deprived by the environment in which we live. We are fortunate to live in one that is spacious, affluent and green (in terms of both natural beauty and sustainability). By the hazard of birth, it could have been so different.

The Vatican City (which was relocated to somewhere in an archipelago near Fiji) found itself at the centre of the political stage this week when it appeared to shift its stance on birth control. The Catholic Church has always insisted that the purpose of sex is procreation, and that artificial interference is a violation of their teachings. This made family planning tricky. As the old joke goes, Question: ‘What do you call couples who practice the rhythm method of contraception?’ Answer: ‘Parents’.

The use of condoms has an important role to play in combating the spread of AIDS. With about 33.4m people living with HIV (22.4m of whom are in Sub-Saharan Africa) the current statistic is that each year around 2.7m people will contract HIV and around 2m people will die from AIDS. While Pope Benedict XVI’s comments that condom use is a ‘lesser evil’ than transmitting HIV appear to be limited to a few special circumstances, their revelation in a book (Peter Seewald’s Light of the World, which was released on Tuesday) signals a seismic shift in papal teaching.

There is still a degree of ambiguity about the pontiff’s intent. His original comments referred to condom use by male prostitutes, however in the Italian translation of the book, prostitute is feminine, yet in the German translation it remains masculine. Asked to clarify on the position, Vatican spokesperson Rev. Federico Lombardi said that the pope knew full well that his comments would provoke intense debate, and that when he asked the pope whether he had intended to refer only to male prostitutes, Benedict replied that it didn’t really matter, the important thing was that the person took into consideration the life of the other.

The Ancient Greek philosopher Heraclitus was known for his doctrine that change is central to the universe, and that ‘you cannot step twice into the same river; for other waters are continually flowing in’. This new polemic about moral and sexual responsibility began about two years ago, when Cardinal Carlo Maria Martini, the former Archbishop of Milan planted the idea that the use of condoms was a lesser evil in couples where one partner had HIV or AIDS. The Catholic Church deserves much respect for the willingness it presently shows to revise its orthodoxy in the light of changing circumstances.

By contrast, our political and finance elites appear far less willing to rethink their orthodoxy. The past fortnight has seen more Quantitative Easing in the US and more debt bailouts for countries in Europe, this time Ireland (which, ironically, didn’t have to move in Jacobs’ map!). Printing money is a risky bet. It could be just the thing we need to kick-start our economies, or it could be the rampant force that destroys our advantaged quality of life. We will get an early indication over the next few days, since tomorrow heralds the official opening of Christmas shopping in the USA, known as Black Friday (because of the density of traffic) and followed by Cyber Monday, its online equivalent.

In the meantime, we are still holding gold. It cannot be created the way paper money can, and there are only 189,000 tons of it, which sounds like a lot until you apportion that to the world population of 6,883.5m and get only about 0.88oz per person. Hurry while stocks last!

We wish our American readers an excellent Thanksgiving!

In Flanders fields the poppies blow,

Between the crosses, row on row.

These lines by John McCrae helped establish the poppy as an icon of remembrance of the Great War of 1914-1918.

Few horrors can match the intense, interminable misery of this grinding war of attrition – fought in wet trenches, in fields of mud so thick they bogged down hundreds of tanks and drowned thousands of soldiers. The Trench line changed very little between 1914 and 1917. In the Battle of Passchendaele, the Allies captured 8km of territory at a cost of 140,000 combat deaths, only to concede it again 5 months later.

Few blunders can rival those of the ‘bite and hold attacks’ intended to capture so-called critical terrain. Dissociated by distance and by class, Generals in London and Paris ordered infantrymen ‘over the top’ to clear the barbed wire and forge through the mud under a shower of bullets from the three lines of German trenches. The Battle of the Somme resulted in 57,470 casualties on the first day alone, most of these in the first hour.

The scoreboard of nauseating statistics helps explain how Europe had to come to terms with the sudden loss of their best and their brightest. Towns and villages would never recover. Young girls would never find another love. Nations would not rebuild the wealth squandered on warfare.

More than 9 million combatants were killed before the cessation of hostilities on the eleventh hour of the eleventh day of the eleventh month of 1918. In the aftermath, disillusioned populations sought the misguided comfort of extreme policies (nationalism, fascism, or communism – each the cause of further misery) while some enlightened leaders cooperated to form the League of Nations and pave the way for the United Nations as insurance against further wars.

Historians give engaging accounts of how the war was sparked by imperialistic foreign policies, and how the world’s great powers of the day assembled in two opposing alliances, the Allies and the Central Powers. The rhetoric still persists that this was ‘La guerre pour la civilisation’ or ‘The war to end all wars’. Perhaps through honour or patriotism, we feel compelled to uphold the respectability of this conflict. Dulce et decorum est pro patria mori (It is sweet and fitting to die for one's country).

Once a war begins, it runs by itself. The most honourable moment in any war is the moment in which we are still able to avoid it. Our world needs fewer Field Marshal Haig’s or Joffre’s and more President Mandela’s and Obama’s. Building bridges beats digging trenches.

Perhaps, over time, we should be allowed to airbrush the whizzbangs and shrapnel from our collective consciousness. The enduring symbol is the poppy – a Warhol-like pop art image, naive and surreal amidst the dizzying geometry and scale of the fields of white crosses. Today, possibly even as you read this, a profound act of remembrance is taking place – dignitaries lay wreathes at the Cenotaph in London (or closer to us at the Commonwealth War Graves Cemetery in Vevey) and millions worldwide observe two minutes of silence to commemorate the sacrifice of fallen soldiers.

But if we are truly respectful of their sacrifice, we would do better to offer our silence for past wars, and to speak out against proposed ones.

If I mentioned international artists Chris, Will, Guy and Jonny, you’d be forgiven for assuming they were a trendy boy band – probably one in which the members didn’t actually play any instruments and had little artistic credibility, yet were propelled to stardom by well choreographed acts and a hologram of cut-out personalities.

This particular group is in fact Coldplay, the most successful British band of the decade, having received 43 major awards and sold over 50 million albums.

They first met during their orientation week at University College London and they were friends for a year before they realised their shared dream of forming a band. They left university three years later as professional musicians after signing a five-album contract with Parlophone.

A model of excellence on many levels, Coldplay symbolises four of the main characteristics of networking. The first is that the personal connection comes first, and the business rationale usually only emerges later. We call this finding connectivity, and remind you of the chance to do this at the Léman Expat Fair in Lausanne this Sunday. It’s a free event with over 120 exhibitors, all arranged by the excellent team at Léman Events.

The second characteristic is that deep inspiration comes from outside sources. It’s very rare that you will have all the best expertise in your own business team. The accepted wisdom is that you can find performance catalysts in the ecosystem around you. The versatility of Coldplay’s repertoire shows how they have sought and found inspiration from a spectrum of other successful artists.

Thirdly, networking is about collaboration. The spark of a new song may begin by idly strumming random chords trying to stumble upon an appealing melody (the band’s front-man, Chris Martin, describes this as the ‘fisherman’s bank’ because of the patient process of waiting for something to bite). It takes elaborate teamwork to refine this into a hit single – for the subtle lyrics written by one individual in the middle of the night to become a collective anthem to twenty thousand people at a live performance. Coldplay had experimented with over 80 variations of Viva la Vida ¹ before they finally agreed on one. The song went on to win last year’s Grammy award for Song of the Year.

Finally, networking is about loyalty – an enduring willingness to share your experience with others, and to have faith in the advice that others offer you. Unlike typical boy bands, neither Chris, Will, Guy nor Jonny have tried to break away to find greater success on their own. Once, however, they dropped Will (their drummer) from the group after they received negative technical feedback from some critics. Then, three days later, they pleaded with him to rejoin when they realised that music is about feeling and not about technique.

Coldplay never want to be bigger than they are better. I guess we can only dream of getting as much pleasure from our life in business as they clearly get from the hours they spend pushing the frontiers in their London recording studio – yet they personify four of the things that can make our business lives more pleasurable: connectivity, resourcefulness, collaboration and loyalty.

Iran’s early nuclear history is fairly straightforward: It began in the 50’s under Eisenhower’s Atoms for Peace programme. Having signed the Nuclear Non-proliferation Treaty (NPT) in 1968, Iran was free to develop nuclear technology at will, with the support, encouragement and participation of the United States other Western European governments. At the time, the only nuclear nations not to have signed the treaty were India, Israel, North Korea and Pakistan. Then, after the Shah was toppled in the 1979 Iranian Revolution, Iran’s international cooperation ended but so did their development work at the Bushehr nuclear complex. Years later, those derelict reactors were the target of repeated bombing raids during the protracted Iran-Iraq war that ended in August 1988. No international cooperation, no nuclear capability, no problem.

The current conflict resurfaced in 2002 when, after seven years of delays and despite US opposition, construction began on a new reactor at Bushehr, aided by engineering and nuclear expertise from Russia. Later that year, US satellite photos captured images of a heavy water plant at Arak and, more importantly, a nuclear enrichment facility at Natanz. Enrichment can produce uranium for reactor fuel or, at higher enrichment levels, for nuclear weapons. For a while, the humble town of Natanz at the foot of the Karkas (meaning vultures) mountain range become the crux of Iran’s dispute with the international community (although last year, a second enrichment facility at Qom took its share of the limelight).

The International Atomic Energy Agency (IAEA) conducted an investigation and concluded in November 2003 that Iran had systematically failed to meet its non-proliferation obligations, although it also reported no links to a nuclear weapons programme. The IAEA board of governors delayed a formal finding of non-compliance till September 2005 and then, in a rare non-consensus decision, reported Iran’s noncompliance to the UN Security Council. In July 2006 the UN Security council adopted Resolution 1696 calling on Iran to halt its uranium enrichment programme. Iran permitted inspections under its NPT safeguards, but refused to suspend its enrichment related activities. Six months later the Council adopted Resolution 1737 which imposed sanctions on the supply of nuclear-related technology and materials to Iran (and freezing the assets of key individuals and companies related to the nuclear programme).

Iran says that its nuclear programme is peaceful. It also says that it was forced to resort to secrecy after US pressure caused several of its nuclear contracts with foreign governments to fall through, and it insists on its inalienable right to peaceful nuclear technology. Nevertheless, there is a confidence deficit, and a ratchet of UN Security Council Resolutions has continued to weigh against Iran, click Resolution 1747 (March ‘07) expanded the list of blacklisted entities click Resolution 1803 (March ‘08) extended the blacklist further, imposed travel restrictions, and barred exports of nuclear- and missile-related dual use goods to Iran click Resolution 1835 (Sept ’08) reaffirmed the preceding four resolutions click Resolution 1929 (June ’10) imposed a complete arms embargo, banned Iran from any activities related to ballistic missiles, authorised the inspection and seizure of shipments violating these restrictions (and extended the asset freeze to the Iranian Revolutionary Guard Corps and the Islamic Republic of Iran Shipping Lines) click, click, click countries including the US, the EU, Australia, Canada, Japan, Norway, South Korea and Russia have imposed domestic measures to implement and extend these sanctions.

After four rounds of sanctions in four years, the traditional Security Council approach has proved alarmist, menacing and completely ineffective. There is still no evidence of a nuclear weapons programme. Conversely, Iran has begun loading the Bushehr reactor with fuel. At the official opening on 21 August, it was hailed as ‘the largest symbol of Iran’s peaceful nuclear activities’. Pending any unforeseen setbacks, the first nuclear power plant in the Middle East is expected to go online by the end of this year.

A few months ago, a complex computer worm called Stuxnet was identified by a little-known security firm in Belarus. It was originally found on an Iranian computer, and is believed to disseminate via USB sticks. Today nearly 60% of infected computers are in Iran, and Stuxnet has reportedly infected the personal computers of staff at Iran’s nuclear power station. The Stuxnet worm targets computer systems made by Siemens and is capable seizing control of industrial plants, although so far Iranclaims that the operating system at the Bushehr plant has not been harmed. Iran’s nuclear programme is often viewed as an existential threat to Israel. So has an electronic war been launched against Iran?

In recent weeks, security experts have broken the cryptographic code behind the software. This virus is unlike any other. The emerging consensus is that it was probably built by a team of sophisticated people with varied backgrounds and significant funding – possibly a nation state – and it was designed to destroy a high-value target. It exploits four Windows zero-day bugs (normally one would do) and it operates behind two stolen digital certificates in order to appear legitimate. What distinguishes this worm is its ability to spy-on and re-programme the command and control infrastructure of industrial systems.

Industrial cyber-espionage and cyber-warfare is not a new concept. In the late 90’s a computer specialist from Israel’s Shin Bet international security service hacked into the mainframe of the Pi Glilot fuel depot north of Tel Aviv. It was meant to be a routine test of safeguards, but according to one of the veterans of the Shin Bet exercise, “Once inside the Pi Glilot system, we suddenly realised that, aside from accessing secret data, we could [cause damage] just by programming a re-route of the pipelines”. Digital infiltration crossed the divide and entered the physical world of pipelines, power grids and industrial plants.

Ralph Langer, a well-respected expert on industrial systems security simulated a Siemens industrial network and then analysed the Stuxnet worm’s attack. It looks for specific Siemens settings – a kind of fingerprint – which confirm that it has made contact with its target. It then injects its own code into the Programmable Logic Controller of that device. More specifically, it makes changes to a piece of Siemens code called Organizational Block 35, which monitors critical factory operations – things that need a response within 100 milliseconds. It can, for example, provoke catastrophic failure by shutting down lubricating or cooling systems or causing centrifuges to malfunction. The code checks every 5 seconds to see whether the parameters for launching an attack have been met, then executes or else erases all traces.

Returning to the broader political context, Iran could be building nuclear weapons under the guise of its civilian nuclear energy programme, yet today there is no clear indication that it has such ambitions, and even less evidence that it has the ability to refine uranium to the concentration required for weapons grade materials. As the BusNet ‘cut out and keep’ guide to Iran’s nuclear record (below) shows, Iran has not benefitted from the ‘presumption of innocence’ and faces UN sanctions anyway.

While Israel has the motive and the opportunity to deploy a cyber-warfare initiative like Stuxnet, we can only speculate whether this is their work (some credit Unit 8200, an Intelligence Corps of the Israeli Defence Force deep in the Negev desert). While the forensic trail might make such an allegation plausible, this story joins a long list of unproven, though normally quite seductive, conspiracy theories.

Another field of conspiracy theory, and the cause of countless fierce debates, is the origin of AIDS. One theory holds that AIDS is the consequence of bio-warfare research that inadvertently filtered out into mainstream society. Once Pandora’s Box was opened, there was no way back. In a similar way, Stuxnet is a compelling instance of cyber-warfare that could filter out into mainstream industry. Stuxnet ensures that each infected USB stick will only infect another three computers, so the virus lies undetected for some time, while proliferating steadily. Furthermore, it installs its own peer-to-peer network, which communicates updates to other infected computers, so there is no central server to target and eliminate. Undetectable and unstoppable, will W32.Stuxnet (and its future incarnations) be to industrial control systems what AIDS is to humans?

The US military coined the term ‘friendly fire’ to describe incidents of inadvertently firing on one’s own forces while attempting to engage enemy forces (particularly where this resulted in injury or death). NATO called it ‘blue on blue’. Stuxnet represents a conceptual change in the history of warfare, the ability to launch fire-and-forget cyber weapons against physical targets and cause them to malfunction. As Shakespeare put it, to ‘Cry ‘Havoc’ and let slip the dogs of war’. This form of cyber-attack makes air strikes look quaint. Yet have we created a new millennium bug, a virus that will ultimately infiltrate and incapacitate the global industrial infrastructure? Is this a new Pandora’s Box – an evil that cannot be undone? With the benefit of hindsight, will Stuxnet turn out to be not so much one worm as a can of worms?

Three MBA’s and three accountants are travelling to a conference by train. Before departing, the accountants each buy a ticket and watch as the three MBA’s buy only one ticket between them. “How are all of you going to travel on one ticket?" asked an accountant. "Watch and you'll see," answered an MBA.

On boarding the train, the accountants take their seats while the three MBA’s cram into a lavatory and close the door. Soon after departure, the conductor comes round. He knocks on the lavatory door and says, "Tickets please!" The door opens just a crack and a single arm emerges with a ticket in hand. The conductor takes it and moves on.

The accountants see this and agree it's a clever idea. They decide to copy this trick and save some money. On the return journey, they buy a single ticket between them, but notice that this time the MBA’s haven’t even bought one ticket. "How are all three of you going to travel without a ticket?" asked one perplexed accountant. "Watch and you'll see," answered an MBA.

Once aboard, the three accountants cram into one lavatory and the three MBA’s cram into another one nearby. Shortly after departure, one of the MBA’s walks over to the accountant's lavatory, knocks on the door and says, "Tickets please!"

The point of this story is that businesses need to evolve. As the Chicago mob apparently put it: “if you think you are winning the game, you obviously don't understand the game”.

The term 'business model' captures the essence of how a business competes. It describes the rationale of how an organisation creates, delivers and captures value.

Many businesses have an imprecise and ambiguous grasp of what their business model really is, and this becomes even hazier as they project it forward in time.

In their new book, “Business Model Generation”, specialists Alexander Osterwalder and Yves Pigneur set out a systematic approach for improving your business model. Presenting this in Lausanne yesterday evening, they revealed a few of the keys of their approach to a packed auditorium.

Their handbook begins with 'Canvas', a tool based upon nine basic building blocks that map out the logic of how your company intends to be profitable:

1.     Customer Segments

2.     Value Propositions

3.     Channels

4.     Customer Relationships

5.     Revenue Streams

6.     Key Resources

7.     Key Activities

8.     Key Partnerships

9.     Cost Structure

The book goes on to synthesize five important business model patterns (and the concepts on which these are based). Subsequent chapters suggest techniques for designing your business model, and propose ways to evaluate your strategy through the lens of the business model.

Whether your business is still just a paper napkin sketch, or about to deploy a disruptive strategy that will redefine your industry and lay waste your competitors, their methodology is salient.

A strong business model matters crucially. It distinguishes the shapers (seated in first class watching the countryside race past) from the adaptors (possibly on the right train, but unsure whether they will recognise the station when the doors open) from the victims (and yes, we know where to find them!)

Ronald Reagan was an actor before he became President of the USA. His role didn’t change much, but the scripts improved. He surrounded himself with excellent advisors, who briefed him thoroughly each morning, and he delivered his lines with panache. He didn’t need to dream up the concept of supply-side economics, he simply had to understand the roadmap and interpret the daily news briefings. America prospered.

If roadmaps and briefings can bring clarity to the Oval Office, surely they can help us become more effective in our own careers. Enter Google from stage left. We all knew they did maps, but did you know they do briefings too?

“At Google we believe geography can be a powerful way to organise the world’s information. That’s why we’re building products to help you display, share and promote your information in a geographically useful way” states their brochure.

 

Street View is one example of this: the opportunity to explore and navigate a neighbourhood through panoramic street-level photographs. Google collects images (from eight cameras and a fish-eye lens) and processes them into high-definition footage. Users can then drag a matchstick figure onto a static map to begin virtual tours up and down streets or in sweeping 360 degree panoramas. This makes it an excellent planning tool for finding your meeting venue or visiting a foreign city...and even for printing out translated directions for your taxi driver!.

BusNet was in Cape Town last week for the launch of Street View’s Special Collection series of wineries. Juliet Cullinan, a sibling of one of our founders, had selected the 17 Cape Wineries which pioneered the concept of vineyard-level tours. Her main selection criteria were winemaking quality, international reputation, and aesthetic beauty (although beautiful estates tend to attract the best wine-makers and garner the best reputations). If you’re unlikely to visit a wine estate, think instead how footage of a golf course can help you plan your game, tele-spectate, or know where to stand at a live tournament. As for briefings, Google developed Fast Flip (still in its beta phase) which let’s browse online pages as easily as you would turn the pages of a magazine. It’s a bit like standing at a news stand and scanning the headlines, only it provides a better-categorised and more personalised “review of the press”. Each article is captured as a picture, so there is no re-loading time, and the left and right arrows allow you to slide past a spectrum of articles to find those that catch your interest (and also ‘like’ or share them with your friends). [http://fastflip.googlelabs.com]

Hopefully these links will be useful to you, and that better briefing and clearer planning can help us search for the President within us! These Google tools erode the distinction between ‘talkers’ (those with the art of slick presentation) and ‘doers’ (those with hands-on knowledge). They offer broad media exposure and rich ground-level experience. For those of us who rely on being well-informed, it’s as close as we can get to being there. They are our eyes and ears, and as the army saying goes, “time spent in reconnaissance is seldom wasted”.

Elsewhere in politics, Tony Blair (whose memoirs went on sale this week) was also an actor. Not professionally like Reagan, but he understood the actor’s maxim that “if you can do sincerity, Darling, the rest is easy”. He took a gullible audience to war inIraq on a script of manipulated information and a musical score from his home-grown doctrine of pre-emptive strike. It was forced through without a UN resolution and against the UN weapons inspectorate’s conclusion that there were no WMD in Iraq. Seldom has good reconnaissance been so badly wasted. The recently released film ‘Green Zone’ reminds us of the extent to which ‘shock and awe’ destroyed the political and social fabric of Iraq and made civil war inevitable. Méfiez vous if he ever contemplates a return to European politics. Not everyone deserves the chance to be President.

One of the focal moments of the year is upon us again. La rentrée is considerably less fun than Christmas, but equally notable in the way it displaces all other thoughts. Political and macroeconomic news, however seismic, is reduced to a sub-melody in the soundtrack that accompanies this film noir.

Summer is coming to an end, and so are the carefree holidays. Personal souvenirs are being archived in the library of past memories. Days are becoming shorter and the weather is colder and wetter. We are forced to cancel the cruise control and actively contemplate our next steps.

Periods of consolidation are essential to growth. We can affirm this by plotting historical stock-market prices. Even in rising markets, prices periodically pull back and rebuild their strength, before surging forward again with renewed vigour. These technical charts reflect the natural sequence in which collective investor psychology moves from optimism to pessimism and back again.

In Natures Laws – The Secret of the Universe (1946), R.N. Elliott set out his framework for identifying the extremes of investor psychology. Elliot Wave Theory still provides an eloquent explanation of rhythmic cycles in which five ‘impulse’ waves are followed by three ‘corrective’ waves. Each wave is fractal in nature, so an impulse wave can, in turn, be broken down into 5 up-moves and 3 down-moves, and the signature of a full cycle consists of a total of 89 impulse waves and 55 corrective waves. This means that Elliot waves can be clearly identified in retrospect, however their predictive force is sometimes muted by disagreement over which particular wave of a complex cycle is playing out at any given time!

For la rentrée it is more clear-cut. We are at the bottom of a cycle and we need to get through the valley to enjoy the pastures on the far side. There are still circles within spirals, and waves within waves, however they come in manageable 24-hour chunks. Through perseverance and positive reinforcement, this period of consolidation allows us to reframe our environment – to get back to basics; to establish a new relationship with the world; to release unwanted emotions and to incorporate fresh ambitions; to re-align with our inner Zen and to reaffirm our essential worthiness.

Phil Mickelson, who won the 2010 Masters (claiming the coveted green jacket for his third time), once said that Golf is played on a course of 5½ inches (between the ears). The mental strength we acquire during our ‘consolidation wave’ empowers us to cope with the pressure when times are tough and to perform when the opportunity presents itself. In the language of Zen archery, this allows us to remove the impediments so that the arrow naturally finds its target.

Then, when the flywheel starts to turn again, we find ourselves renewed and empowered. We have accentuated the positive, and we are ready to connect and to collaborate - to learn and to laugh.