I am sitting on a pile of rocks

I am sitting on a pile of rocks.

That makes me the greatest architect and engineer of all time.

Unfortunately not. The fact that I am sitting on a pile of rocks obviously does not make me a great architect, or an architect at all. The Pharao Cheops had a clear vision, bought (or enslaved?) the skills he needed and then transformed a pile of rock into one of the most impressive monuments in mankind history.

This simple thinking does not seem to apply to the modern world.

Many of the companies and AI guru I met claim: “I am sitting on a gold chest”; that chest would be the data they gathered and think they own. And then they continue: “we need to hire a data scientist and make money”. Just missing: passion, idea, business sense, vision.

Unless you have a clear vision on what to do with your data, which market need you want to address, unless you are sure that there is market traction and someone would pay for your “intelligence”. Just do not do it .

If you want to change the world or simply make money, you need the vision, the will, the skills and probably deep pockets. Or just the passion.

A data scientist, no matter how much you pay him/her, won't help at all

If you are interested in discussing simple, disruptive ideas in this field, just contact me.

If you are not, here is an article (re)published on linkedin on the topic

https://www.linkedin.com/search/results/content/?keywords=This%20skill%20is%20now%20worth%20millions&origin=SWITCH_SEARCH_VERTICAL

Why I do love finance

Finance people are the number crunchers….

Finance is the place where you can get the numbers….

We do the business, the finance will take care of the rest….

Finance is dry….

While discussing finance with many counterparts I hear very often similar statements. If one was to believe any of those interpretations of the role, finance would be a very sad place to be.

I love finance and I believe that is one of the most exciting functions in a company. Why is that?

Because finance is the place you need to go first if you want to understand the business, what happened to it, what is happening now and what could happen if you do certain things. Finance is a reflection of the beginning and the end of all company’s activities.

As a finance person you have to own the future, the present and the past (yes, also the past). This means that you have to take responsibility and tell the management or the owner what is working and what is not, regardless of the consequences. And you have to stand upright also for the past and for the things you might be not responsible for: if there is some mess created in the past to be sorted out, you still sit with it and will need to fix it, no matter who created it. The willingness to own the past, the present and the future determines the quality of your finance people.

That is why I love it.

I like to think of finance as a big bathtub with one faucet pouring water in (revenues) and several holes draining it (expenses and investments). The art of managing the water flow is the reflection and the catalyst of the company’s strategy.

What you want to have is a constant level of water and a pleasant temperature. If you have too much water pouring in (allowing for example revenue enhancing discounts), the tub will spill and you will waste the water; eventually you will need to dry the floor. If you draining holes are extracting too much water, the tub will be empty at some point.

How do you know what is the right way of managing the flow?

My own philosophy in understanding the appropriate “water” level resides in understanding the difference between creating value and extracting value.

You will create value if you keep a pleasant level of water, at the right temperature, so that you can bath (or drink; in this case you are taking the dividends) as long as you want.

Extracting value can happen through reducing expenses and investments by closing the drains and opening the faucet too much. The joy of watching so much water filling the tub will soon be replaced by the sadness of drying the floor and paying for the floor repairs.

Dear salesmen, strategists, marketing people, IT people: next time you pass by the minimalistically furnished finance offices, with poor light and worn down floor, think about the bath tub. You too will love finance.

I love bathing. I love finance.

  

Fragen und Antworten zu einem Interim Projekt

§  Was genau hat der Kunde Ihres letzten Mandats von Ihrem Einsatz erwartet?

Mein Kunde ist ein Unternehmer der zusammen mit einem PE Fond eine internationale Firma aufgebaut hat. Da die Firma aus mehreren Akquisitionen entstanden ist, brauchte der Kunde eine stärkere Integration, eine Hinterfragung des Geschäftsmodells, eine Stabilisierung der Liquidität, eine glaubwürdige  „equity story“ und Unterstützung bei einigen M&A Projekten.

§  Was waren aus Ihrer Sicht die größten Herausforderungen beim Projekt/ im Mandat? Auf welche Hürden sind Sie gestoßen? Die größte Herausforderungen waren drei:

o   Die Firma und das Management auf das wichtigste konzentrieren zu lassen

o   Das Management dazu zu bringen Verantwortung für messbare Firmenziele zu übernehmen

o   Zeit und Ressourcenverschwendung zu vermeiden bzw. die Ressourcen in Richtung erfolgsversprechende Tätigkeiten zu kanalisieren

§  Was waren Ihre ersten Steps/Umsetzungen im Mandat/Projekt?

Es war sehr wichtig das Geschäftsmodell, die Kultur und die vorhandene Kompetenzen zu verstehen. Dafür waren einige Gespräche vor allem mit dem 1. Und 2. Management ebene sowie mit einigen Kunden sehr beleuchtend. Durch ein neues Working Capital Management habe ich die absolut notwendige Liquidität und Flexibilität generiert die, die Firma aus einer Notsituation weggesteuert hat. Mit einer stabilen Liquidität wurden nicht nur einige notwendige Prozessen am laufen gebraucht sondern auch die Türe für eine effektive und zielgerichtete Zusammenarbeit geöffnet.

§  Was war für Ihren Erfolg ausschlaggebend?

Aktives Zuhören, Vertrauensgewinnung und Seniorität gepaart mit Kreativität und Offenheit waren die erfolgskritische Faktoren. Man hat die notwendige Zeit gewonnen für die Vorbereitung und die Kommunikation einer Attraktive Equity Story.

§  Welchen konkreten Nutzen haben Sie für Ihren Kunden bewirkt?

§  12,5 Milionen Eur Liquidität verfügbar (bei einem Umsatz i.H.v. 45 Mio Eur)

§  Eine stabile Firma die Ressourcen und „Kopf“ hatte für das angestrebte internationale Wachstum

§  Die Beendigung einiger für die Firma wertvernichtenden M&A Opportunitäten

§  Eine stärkere Integration der zugekauften Firmen

§  Ein „wasserdichten“ Transfer pricing Modell

§  eine 50% Erhöhung des Aktienkurs

§  Was hat Sie an den Projekt/ Interim Mandat besonders gereizt?

Die Möglichkeit Komplexität zu reduzieren und die Firma von Krisenmanagement in Richtung Zukunftsplanung zu umzustellen

§  Welche Learnings konnten Sie für sich aus dem Projekt mitnehmen?

Der Satz von Saint-Exupery mag ich immer wieder neu erlernen und direkt experimentieren: „Wenn Du ein Schiff bauen willst, dann trommle nicht Männer zusammen um Holz zu beschaffen, Aufgaben zu vergeben und die Arbeit einzuteilen, sondern lehre die Männer die Sehnsucht nach dem weiten, endlosen Meer.“

§  Welche Trends beobachten Sie aktuell auf dem Interim Markt in Ihrer Branche oder auch in anderen Branchen?

Ich beobachte eine „commoditization“ der Interim Funktion. Es wird zunehmend auf niedrige Preise und Beziehungen geachtet anstatt auf Kompetenzen, Skills und Erfahrungen. Viele Unternehmen scheinen noch nicht begriffen zu haben, dass das Interim Management Modell die beste alternative zu der Headhunting wette ist.

Mr Bias and the future of social media

Some days ago one of the most reputed most known Italian contemporary writer, Umberto Eco, passed away. In my view he was very sharp and I like some of his quotes. The one I like most is about books:

“People who don’t read will reach the age of 70 having lived only one life, their own. Those who read will be living 5000 years; they where there, with Adam and Eve in the garden of Eden, they joined when Renzo and Lucia married and where there when Leopardi wrote “the Infinito", as reading brings immortality’.

There is another quote of Umberto Eco (and an interesting comment to it) which keeps me thinking, which I would like to share: 

“Social media gives legions of idiots the right to speak when they once only spoke at a bar after a glass of wine, without harming the community. Then they were quickly silenced, but now they have the same right to speak as a Nobel Prize winner. It’s the invasion of the idiots.” 

Among the many comments to this quote, Dr Jim West  wrote on his blog:

 “… the idiots have the right to speak but they should have no expectation that anyone with sense will listen to them much less take them seriously.  The idiots have as much right to be heard as CNN and the Huffington Post and Fox News and NBC and ABC and CBS and the Discovery Channel and the History Channel.  But like those outlets of infotainment, they have no right to be taken seriously when they speak about matters like theology or history or exegesis or archaeology.

Indeed, the truth is, only idiots heed idiots.  So let them.  Those who wish to know better will seek to know better and those who are satisfied with rank ignorance, stupidity, and misinformation will never care for the truth any more than a person who watches the Naked Archaeologist really cares about the facts.  Their ignorance is invincible.  They should be left to it.  To rot in the swampy stew of their own putrid mindlessness.”

Here my two cents’: I like both comments. Further I believe that one day the social media will collapse and/or implode for the reasons mentioned by Mr. Eco. However I do not share Dr. West’s optimism.

 And that is because of Bias.

 Bias was a politician and legislator of the 6th century BC and was one of the “seven wise men”. Asked several time to write a sentence to be engraved on a temple, Bias refused many times because his quote was “dangerous”. At the end he changed his mind and  provided this sentence:

αʹ οἱ πλειστoι κακoί

“The majority of men is bad”

This sentence is dangerous: if we accept its validity, certain pillars of our western civilization are at risk of  collapse. Democracy, for example. Bias was really a wise man.

Shall we trust democracy? Of course! There is no better system I am aware of.

Shall we always trust the majority? I am not so sure....

Mussolini and Hitler were democratically elected.....

At a closer look we do not always trust the majority of people. In our constitutions we exclude referendums for tax matters because the vast majority would vote to abolish any tax (even if taxes, if properly spent for good purposes like education, roads, health care are the basis of our society).

Even if I hope that Bias is wrong, I do not succeed in trusting the majority of us as able to discern what is good from what is bad in the net. And there is nothing we can do about it. 

As everything which is human, the “invasion of the idiots” as Mr Eco puts it, will come to an end. 

At some point.

The five “T”s of risk management

Few years ago I read a brief article issued by an oil company about risk management[1].

I found it so illuminating that I decided to develop my own version of a tool which over the years has proven very effective when dealing with risks, no matter in which context.

Here is my take:

We live in an uncertain universe and it would be foolish to waste time to think how to eliminate “risks”. The most important thing you can do is to manage risks so that the impact could be mitigated in case the “risk” event occurs. It is important to structure your course of action in connection with your appetite for the risk.

How can you do so?

Think of 5 “T”s. in regard to a certain unfortunate event you can decide to

1.     Take the risk

2.     Treat the risk

3.     Transfer the risk

4.     Terminate whatever you are doing

5.     Take a tea (or Take it easy)

Let us use a concrete example to explain the concept. If you happen to live in Naples who is a large city in southern Italy build very, very close to the Volcano Vesuvius, and want to buy a house you know that you are exposing yourself to a certain risk. Vesuvius is a dormant volcano that has been quiet for a while, but some day, as it did in the past, will erupt again causing destruction.

The risk certainly exists and cannot be eliminated. However you can decide to:

1.     Take the risk. You will buy your house and won’t care much about any eruptions.

2.     Treat the risk. Yes you can buy the house but it will be an anti seismic building close to a motorway, allowing you to leave quickly if anything bad happens.

3.     Transfer the risk. You may decide to transfer the effect of an eruption by taking the appropriate insurance (assuming you find one) and indicate as a beneficiary someone living far away, whom you like very much.

4.     Terminate. If your appetite for the risk is low, you may decide to buy your house somewhere else (which will deprive you from the pleasure of living in the second most fascinating and beautiful place on earth[2]).

5.     Take a tea (or Take it easy). When looking at the risks around you, if you are willing to do an intellectually honest job you should consider leaving politics and emotions out of your risk management structuring. Once you make your considerations, the itchier is your issue, the better is to let someone independent, external to revise your ideas.

I used my extensive tool in contract negotiations and when addressing Boards for difficult decisions many times and I was surprised to see how successful, calming and rewarding a structured approach can be.

As a final input: in Chinese the word for "crisis" (危機) is “frequently invoked in Western motivational speaking as being composed of two Chinese characters respectively signifying "danger" and "opportunity"”. (Wikipedia)

Even if this is etymologically incorrect, I still like the idea.  

Should you need advice or support in these matters, please do contact me.

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[1] I think it was Shell but unfortunately I can’t find anything on this topic attributable to the reputed oil company.

[2] The most fascinating and beautiful place on earth is obviously Salento, the area I come from......