Risk & Commodities

About technology, business & management issues..

  During the last decade the commodities markets have experienced sharp fluctuations particularly strong price rise in oil prices, grains and some precious metals. This has led to farmers, industry, mining and petroleum related industries to suffer from year to year uncertainty.

The reasons are many: from long and protracted drought in the prairies of Russia and China, as the depletion of oil reserves in the Gulf of Mexico to the announcement by the U.S. government to support ethanol production based on corn.  So, how to establish mechanisms for producers, intermediaries and distributors to ensure a profit margin and create a foundation to grow their business?

Aristotle  mentioned  Thales of Milete as the inventor of the concept of futures contract by menas of an olive harvest in ancient Greece. Thales was  such an accurate predictor of how the conditions of the olive harvest would be months before it and this allowed him to establish price contracts with producers which in turn guaranteed in advance the price of it, avoiding both the vagaries of the market wreck at harvest.

But these financial vehicles not seem to have done to implement in many industries whether unions or organizations associated regulators have decided not to implement or have not been able to craft the right model for it.

There is a whole opportunity for the development of financial engineering vehicles to establish conditions for protection against the risk of volatility commodity prices.

The question remains whether there will be no other interests,  which are clearly  blocking the establishment of such vehicles.

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The eternal micro manager.

About technology, business & management issues..

   It was over a restructuring process within the company in which  I had collaborated for eight years when I realized it.  Senior Management had hired a consultant who worked out a pretty decent proposal and rationale for the size of the company at that time. "We are building the foundations of the enterprise for the next 20 years," said one of the managing partners.

The idea seemed perfect: professionalising the business, find performance metrics of the contributors to avoid subjectivity and to define roles and processes within the company. Create a structure in order to create a career path within the company itself (¿naive?).

But the owners could not get rid of the micro manager buried deep inside of them. That little devil in all of us that constantly tells you that you do not  need to delegate anything to your subordinates (nobody can do  it better than you !) that you need to check them out all the information generated or passing through them (why trust them?) and that planning meetings are merely a constant exercise of accountability that only strained relations between owners and delegates.

How to avoid the cancer that exists in virtually all businesses in the world? I think it is impossible to eradicate it: every business owner feels like he is the next incarnation of Steve Jobs so their bad manners and contempt and capricious treatment are fully justified.

Perhaps an effective tactic, as mentioned by the founders of 37 signals in his book REWORK,  is to avoid the maximum weekly meetings. As Jason Fried mentioned it, they have no particular target, people do not come prepared, are ambiguous in their objectives and always, always a fool wants to get the attention in the meeting and he thinks he has to share his wisdom with all.

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Agile business.

About technology, business & management issues..

It's been 11 years since Martin Fowler and 17 other programmers released a manifesto called Agile Software Development. The manifesto,  a highly praised ideological tool for people in the field of technology was a simple document which sets out some principles of a methodology to develop software more quickly and objectively.

Since that time the term and concepts have been applied to various aspects of enterprise development, particularly in start ups. Arguably, the lean start-up is a unique version adapted from the principles of ASD but with their particular characteristics.

The ASD emphasizes software development and the creation of a methodology that contrasts with the waterfall model which implies the full development stage of software before its testing phase has started.

If we make the extrapolation of these concepts to the idea of starting a business or a personal project, this is a valuable tool since it allows the flexibility to make changes to the business model necessary to ground the idea in a practical and concise way, without dogmas of faith or prejudices who die hard.

Figures determine the premises, but once put them on paper, developing and implementing action processes should be a dynamic exercise and constantly changing to adjust as needed. This would be like a properly calibrated weighing scale industry or  a simple called action to just tune into your  favorite radio station.

Test, tweak, edit and start over. It should not be so complicated.


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The business model: theory and reality.

About technology, business & management issues..

About ten years ago arguing with a former employer, a group of young people in their twenties ,who were part of the management team that run the projects where the company was involve, were not really keen on his claim. Those meetings stressed out the fact that the business model of general corporate and the one of  individual projects must be realistic and that these changes should be communicated to those affected. - "The projects are just perfectly in theory, in real life the dynamic is different, "- he said frequently.

The memory came to mind after talking to several people who are frequently faced with the grim reality of the business or a single investment project that has not been undertaken as they had planned in their minds. The reality was very different from the theory.

The reasons are many and countless: the entry of an unexpected competitor (in business with few barriers to entry), lack of funding (no more personal & family savings), volatility in prices (for projects that invest in commodities ) excess in sales and marketing  budget(if  you want to get into horizontal markets) and to the impossibility of finding a profitable business model in the short and medium term (tech-related companies).

The funny thing is that people get scared as if this were not the common denominator of any venture that has been started, as if fate had taken a fancy to make them fail.
The reality is that when this happens the easiest thing to do is understand the dynamics of business and make the proper adjustments to pull it off. This is especially important in technology companies that handle many dogmas as excess investment (usually raised capital) or reaching profitability in the long term.

Many of the lean startup philosophy applies in these situations. Applying common sense, if decisions are quick and assertive, if you remove the dogmas of the mind then you can adjust on the run the business model and surprisingly fix what was supposed to be broken.

www.clarensyst.com.mx