5/31/17 At a recent meeting of The Presidents Forum, Bill Blum, Alpine Business Systems, reminded us to maintain a cyber security awareness. Some points Blum stressed: 1) The best way to protect yourself is to NOT click on any link in an email, text, or tweet unless you are Sure it is safe. 2) DO NOT click to open any attachment unless you are Sure it is safe. 3) There is no single cybersecurity solution that is sufficient; we need multiple layers of defense – anti-virus, firewall, Operating System updates, virus protection, to protect all assets. 4) Backup your personal data to a reputable service (Mozy, Crashplan, Carbonite). REMEMBER syncing your data to iCloud, Google Drive, or One Drive is NOT a backup. You need to back up to a place that has a different username and password. 5) Use a Secured Wi-Fi Network. On an unsecured public Wi-Fi network, information is not encrypted, putting your personal information at risk. 6) Of course, ongoing education and training are necessary to be vigilant against new risks and threats. 7) Finally, we must take better control of our own digital security to keep safe from cyber threats Good points from Blum that were well received by the members attending.
At a meeting this week of The Presidents Forum, as part of a broader discussion about long-range planning, risk management, and market opportunities, the members talked about the ominous tones coming from the retail sector. There are lessons to be learned from this troubled sector, but mainly a reluctance to change. As an example, on Tuesday, Sears announced in their annual 10K filing “Our historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern…While our historical operating results indicate substantial doubt exists, we want to be very clear that we’re taking decisive actions to mitigate that doubt.” While Sears may mitigate losses, and raise cash by selling assets such as Kenmore appliances, Diehard batteries and the recent sale of Craftsman tools, Sears will struggle as they attempt to transform itself from a catalog mentality to an on-line mindset. Change may be hard but as former UCLA basketball coach John Wooden said “Failure is not fatal, but failure to change might be.” An active discussion among the members revolved around the need to keep focused on our principle business activity. The lesson for us, as the members stressed, is to continually assess our own business model to assure it continues to focus on the needs of our future customers not the past ones. And, of course, change when necessary.
2/27/17 Each year, I look forward to two annual newsletters. The Bill and Melinda Gates letter came on Valentine’s Day. Warren Buffet’s annual letter to Berkshire Hathaway shareholders came this past Saturday. Both newsletters are full of confidence for today and the future. Buffet’s letter focuses on the American stock market and what its trends broadly represent. Buffet wrote “America’s economic dynamism… One word sums up our country’s achievements: miraculous… Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.” The Gates newsletter’s emphasis is on world poverty and what those trends represent. Bill Gates wrote “Actually, in significant ways, the world is a better place to live than it has ever been. Global poverty is going down, childhood deaths are dropping, literacy is rising, the status of women and minorities around the world is improving.” Melinda Gates added “Optimism is a huge asset. We can always use more of it. But optimism isn’t a belief that things will automatically get better; it’s a conviction that we can make things better.” The Gates newsletter ends on a positive note regarding the success of their initiatives: “We can’t put a date on these events, and we don’t know the sequence, but we’re confident of one thing: The future will surprise the pessimists.” Each of these two newsletters are lengthy but are worth reading as they provide lots of reasons for each of us to be upbeat. I’m already looking forward to next year’s.
01/18/17 At yesterday’s meeting of The Presidents Forum, the members had a discussion on smart technologies, that may increase our personal productivity. The discussion started with smart house technologies like: lights, thermostats, security and video doorbells. Members commented that these technologies are not yet as seamless as advertised. The next group of technologies is “everything on demand” –sort of the Uber of everything: transportation, food delivery, lodging, personal services, etc. This is another tool requiring multiple apps that yet, don’t integrate well with each other. A third group of potential technologies that improve productivity is digital personal assistants. Siri, Cortana and Google Now are among the most popular of a wide range of personal assistant apps, but they are only best at small everyday tasks. The last group of personal technologies discussed was smart entertainment. There is also a large mis-match here, with new TV’s more powerful than the incoming signal, and computer technology that doesn’t assimilate well with home entertainment. The members generally are tech-savvy and use new technologies for both business and home use but we frequently heard “the technology is just not there yet”, when discussing these new products and services.
At a recent meeting of The Presidents Forum, the members had a broad discussion on business transformation, and the need to understand factors that drive competitive advantage, especially among small businesses. Bill Blum, Alpine Business Systems, talked about two industries that will undergo substantial shifts: automotive and lawn care. These shifts, driven by customer preferences will change the way we use these products and services. For example, in the lawn care business, Scotts is creating grass seed that requires little water and fertilizer and only needs to be cut every six weeks. That means we only need 1/6 the number of landscape contractors we have now, with lawn equipment sales also suffering. Likewise, in the automotive sector, electric vehicles, self-driving cars and connectivity will change our thinking about cars to a shared-mobility concept. If ride sharing catches on in a big way, service stations and auto-parts stores, among others, will be negatively affected. However, other new industries though will spring up. While the members discussed use of analytic models, most felt the most effective approach begins first, with identifying the business opportunity and second, determining how models can improve outcomes. This was a great conversation in a rapidly changing world.
At Withum’s Fourth Annual Global Summit, we heard one panel, comprised of representatives of international accounting firms associates with Withum, discuss Congress and international business policies. This discussion was interesting because of the highly-charged focus on trade agreements at Monday’s Presidential Debate. An overall feeling was that trade agreements have had more modest effects on the US economy than the rhetoric suggests. These agreements promote and govern not only traditional goods and services but technology-intensive services where the US has a strong competitive advantage. The agreements provide a rules-based-system that protects intellectual property such as patents by providing dispute settlement procedures when disagreements occur. The US has been a big beneficiary of these procedures. While high-tech and agriculture has benefited from recent trade deals, there have been losers and this is what we heard about in the debate. Manufacturing that relies on unskilled labor has moved to lower wage countries. Perhaps the US has not done all it could to help these disadvantaged workers at home who feel no comfort that jobs are created elsewhere in the US. As this notable panel summarized, trade deals are only a small part of globalization with its rapid movement of goods and service throughout the world. Much of the rapid change in the world economy has come from technological innovation not trade deals. The panelists believed our two presidential candidates were correct that some aspects of trade deals and government policies need to be constantly monitored. An example frequently mentioned is China’s currency manipulation which increases their trade surpluses. The US needs to take action on these type of abuses. The panels put together by Withum from their international partners at HLB International provided a view from outside the US. Their perspective was refreshing and much more positive on the US economy than we sometimes hear. Withum puts considerable effort into these Summits and it shows.
9/27/16 At a recent meeting of The Presidents Forum, the members had a discussion on the new cyber-security regulations in New York State. These proposed regulations require regulated financial institutions to; · establish a cybersecurity program; · adopt a written cybersecurity policy; · designate a Chief Information Security Officer responsible for implementing, overseeing and enforcing its new program and policy; · have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties; · conform to a variety of other requirements to protect the confidentiality, integrity and availability of information systems. · While these regulations are aimed at financial service companies, ensuring the protection and privacy of confidential information is every company’s responsibility. The members at The Presidents Forum spoke about the need to move past the talking stage and begin to implement some of these programs and policies themselves. Members agreed that while the investment in new resources might be considerable, protecting against cyber-attacks is sensible spending.
At a recent meeting of The Presidents Forum, the members had a discussion on the new Department of Labor overtime rules that go into effect on December 1. These new rules change the salary threshold for those eligible for overtime pay from $23,660 to $47,476. While there is a “white collar” exemption from overtime for certain employees, it is not the job title that allows the exemption but three tests that must be met: salary basis, salary level and standard duties. These new rules will require more record keeping about hours worked and duties performed, even for those who were previously salary-based employees. There needs to be a well-thought-out process for these employees under the threshold, that is, raise their salary above the new threshold or begin paying them overtime. This may be a good time to re-evaluate and change responsibilities not only to conform to the new regulations but to improve productivity. The members present agreed on the need to consult an attorney with labor-law experience and an accountant to examine labor cost scenarios before the December 1 effective date. That gives us three months to plan for change.
At yesterday’s meeting of The Presidents Forum, Angela Liu, President, Crispy Green Inc told us she does a sizable amount of her business through Amazon. Liu related that Amazon no longer wants to compete in pricing. She told us this new pricing strategy will surely open doors for other online retailers to go after the bargain hunters. But for those customers who just want to get their purchases fast and no hassles, Amazon still has a huge advantage because of its distribution network and infrastructure. Liu believes that Amazon is shifting more towards the Alibaba model, which will basically be a giant online flea market under the Amazon roof with Amazon taking a cut of every transaction. Amazon is moving from a “Vendor Central” model to a “Seller Central” model, so it won’t have to own inventories of the products it sells. Amazon will provide financial, logistic and other business services under its “Prime”, which is a big draw to a lot of consumers. The Prime membership will then become a main source of profit much like membership fees are to Costco.Frequently, when large companies change their business model, it forces smaller companies who do business with them to also change their model. The overall message from Angela Liu; be prepared for changes.
6/24/16 At the recent Annual Convention of the NJCPA, we heard a speaker – Bryan Smith from CPA Crossings, LLC – talk about data analytics. Most believe that analytic activities will have a positive impact on business activities, processes and profits but there seem to be mixed results with analytic activities actually achieving stated goals and adding value. The companies that are most successful using data analytics have CEO involvement in the activities and initiatives. This includes providing the investment to support analytics through organizational infrastructure and appropriate talent. As an example, The President of WAWA, Chris Gheysens, frequently talks about their ,business success coming from their use of analytics in the hiring process, product selection and locations of stores. According to Gheysens “In business you win or lose in this hyper-competitive market based on the speed and correctness of your decisions, ideas, and investments,” he said. “You’ve got to do things to make your business grow. Analytics is the backbone to all of that”. Bryan Smith discussed some analytic tools like Oracle, Cognos, Hadoop, IDEA, ACL and EXCEL BI. Several of these tools require heavy technical support or external partnerships due to the environment they are pulling data from, while others can be used in smaller enterprises. Bryan’s advice; plan and organize for success, that is align resources with stated goals to create value.
At a recent meeting of The Presidents Forum, Tony L’Altrelli, a Partner at Withum, told us about a futurist that spoke to the Withum Partners. This social scientist talked about trends and possibilities for the future as part of a broader discussion about long-range planning, risk management, and market opportunities. L’Altrelli mentioned that one of the major changes affecting retail merchandising in the foreseeable future is that many malls will close and many retail jobs will be lost. Malls already face high vacancies. Just as the rise of malls precipitated the decline of the downtown retail shopping district, so changing lifestyles and technology will bring about a decline in this 60-year-old way of shopping. This is, of course, a reflection of the broader changes affecting America. It has been said that one key to America’s ongoing success has been our ability to adapt and change. When faced with adversity and opportunity, as a nation we often experiment, adapt, and eventually embrace change. Our federal system allows us to experiment, state by state. From our humble beginnings as a nation, through world wars, recessions, and all manner of adversity, we have often been global leaders in recognizing the inherent opportunities that positive change can bring. Sometimes we as a nation, are dragged by events, kicking and screaming, but we eventually get there. For example, Americans haven’t always been hospitable to waves of immigrants, even though immigration has proven to be a long term source of strength. Economists sometimes use the term “creative destruction” to describe the winnowing process which replaces old business models with better more creative alternatives. And this process is often painful; there are winners and losers. It is apparent that America is undergoing great change; there is a lot of creative destruction happening. At least we all hope it’s creative. Technology and globalization have torched the flame of tumultuous change inside our borders and beyond. From the way we purchase goods and services, to how we communicate and travel, and including the demographic changes reshaping our nation, it appears we are living that old Chinese curse “May you live in interesting times “. We all know that change can be uncomfortable. We have only to look underneath the current political process in both parties to realize many Americans are anxious, even angry. But we also know that change is inevitable. In many ways the train has left the station; are we going to be on that train? The Futurist who spoke to Withum had an overall message that change can be a good thing for ourselves, for our families, for our businesses, and for our communities. But only if we recognize it and face it head on. Have we evaluated the personal and professional risks and opportunities we may be facing in this environment? Do we have a plan?
At a recent meeting of The Presidents Forum, Joan Knorr, President of MK Services, talked about growth strategies. Knorr outlined strategies designed for existing and new markets and existing and new products/services. A principal element is building organizational capabilities, that is, do we have the right people in place to achieve desired growth. A second measure is the overall assessment; do we have the right product at the right price at the right time. Knorr also cautioned us to look at threats while examining growth opportunities. These threats could be the bargaining power of suppliers or customers, the threats of new entrants or the development of substitute products. Joan Knorr’s presentation was short and snappy and to the point and left us with much to think about in growing our business.
At a meeting on Friday for accounting educators, hosted by the (NJCPA) New Jersey CPA’s, we heard of the employer talent shortage and the skills demanded by today’s employers. Employers are affirming a growing importance in three fundamental skills needed today: problem solving, communication skills and collaboration. The big question is where or how do employees gain these needed skills. Are these skills that can be taught and developed at colleges? Or do employers need training programs for all new hires to teach these particular skills? The answer is that everyone with a vested interest in increasing productivity in the US needs to be involved. Another question from the group was how employers assess those needed skills in an interview. It’s easy to assess knowledge and hard skills but difficult to assess intrapersonal and interpersonal capabilities. If this is what is needed, better assessment tools will be necessary. It’s great when educators and the business community come together to talk.
At the SEC’s Chief Compliance Officer event last week, we heard the SEC advise us to assess our cybersecurity preparedness. This included cybersecurity governance, assessment of risks, protection of networks and information, risks associated with vendors and detection of unauthorized activity. Within 24 hours of that meeting, we heard about the Panama Papers, a data breach and leak of 11 million documents pertaining to offshore tax havens and secret accounts of wealthy individuals throughout the world. While many dealings were not illegal, it is a major embarrassment to the people named. And, new regulations are sure to be enacted by world-wide taxing authorities. We should take the SEC’s advice and be continuously vigilant.
At the SEC’s Chief Compliance Officer event today on the compliance function, two words were repeatedly emphasized: Documentation & Disclosure (write down what you plan to do, tell people what you plan to do, then do it). The SEC’s goal is to protect retail investors and investor savings for retirement. In the SEC’s examination of advisors and broker-dealers, the SEC attempts to balance the need to create greater transparency and accountability while being mindful of the benefits of innovation. The SEC also has concerns with assessing market-wide risks, primarily cybersecurity and liquidity controls. In selecting candidates for SEC examinations, the SEC makes extensive use of data analytics. This is a major element of their risk-based initiatives. Protecting investors requires this type of higher-level analysis. It was reassuring to hear the SEC talk about protecting individual investors.
Mike Cangemi, President of Cangemi Company LLC, shared with members of The Presidents Forum his career focus on Business Intelligence. He quickly summarized this complex technology in three phases as follows: Descriptive Analytics – Helps to understand the past, Predictive Analytics — Helps to understand what might happen, Prescriptive Analytics – Helps to find the best course of action. Small business knows it should be analyzing more but available time is not there. As Cangemi pointed out though, a distinct competitive advantage will be gained by increasing proficiency in analytics. The time to make advancements in our analytic knowledge is now.
Mike Cangemi, President of Cangemi Company LLC, shared with members of The Presidents Forum some insights into Bitcoin’s ‘blockchain’, the main technological innovation of Bitcoin. Blockchain allows Bitcoin owners to make verifiable transfers through a completely anonymous publicly distributed ledger system. Cangemi, told the members that numerous tech companies are trying to capitalize on this new process and large companies like J.P. Morgan and NASDAQ are doing testing of this type of system to settle transactions with continuous verification. The way we conduct business with each other is constantly evolving and Cangemi advised us to stay alert and open to new possibilities.
At the Oracle CloudWorld New York Conference last week, there was a session on Oracle’s Human Capital Management system, with specific attention to tools that help Find, Grow, and Retain the Best People. Many now believe that annual performance reviews are obsolete, and a better method is necessary that provides directed and frequent feedback. As an example, in the accounting world CPA’s are required to have 40 hours of Continuing Professional Education per year. Accounting firms are moving from a compliance based system (make sure they get 40 hours) to a competency based system (what is it we want them to learn in these 40 hours). Using HCM software, managers can now specify what skills each person needs and focus continuing education on those needed skills. Assessments are included to verify the employee actually learned from the course taken. HCM software helps retention as employees are kept appraised of their performance in a positive way as they see their skills increasing. Employee turnover is expensive. And in a full-employment market, replacing that employee may be very difficult. For many of us, it certainly is worth the time or effort looking at the new tools out there that help find, grow and retain the best people.
At the Oracle CloudWorld New York Conference this week, there was an active discussion on the shift of asset values from tangible to intangible assets. Many estimates show intangible assets, now comprising 80 – 85% of total corporate value. Determining this value is difficult and generally poorly done. Still, companies need to create strategies that drive innovation, by leveraging technology, that creates value. These strategies will require metrics that assess where and how value is created. Companies talk about future-oriented indicators but the process of valuing, reporting and disclosing intangibles is behind the times. Oracle discussed new products they have to help evaluate the four knowledge resource categories; employees, customers, processes, and technologies. While determining the value of intangibles may always be difficult, acknowledging the importance of value creation, then setting strategies to create value using these types of products as an assessment tool, will prove beneficial to the overall goal of increasing value and corporate worth.
Yesterday, I attended the Oracle CloudWorld New York Conference. I went to hear more about Oracle’s integrated cloud-based suite of business software that may be affordable and beneficial to small businesses. Integration is a big concern for companies as they will continue to use multiple products, like payroll, applicant tracking or a CRM product. Another concern for businesses is whether their current IT infrastructure can accommodate their changing business model. Oracle seems to address these concerns in an effective manner. A one day conference though is not sufficient to make a major decision Decisions on investments in enterprise management solutions are complicated and therefore difficult to make. Oracle’s cost structure for their cloud-based SaaS (software as a service) and implementation timeline (now in months not years) should give small businesses a reason to consider Oracle when thinking about software solutions. As always, a well-thought-out plan is essential.