From Greg's Head

“Trust is earned. If you can do that, people will share more data, which in turn leads to better data.”

When I read this statement by Larry Poneman of the Poneman Institute, I immediately thought, “What kind of Pollyanna world is this guy living in?”

Poneman’s insights were detailed in “Insights and Privacy,” a recent article by Michael Risse, General Manager of Midmarket Business in the US Small & Midmarket Solutions & Partners Group for Microsoft.

Michael writes:

“It is one of the great paradoxes of technological society. At the same time we have enacted laws designed to keep information private (such as HIPAA for the healthcare industry and Graham-Leach-Bliley for the financial services industry), we have also enacted laws designed to make certain information public (such as Sarbanes-Oxley).

Customers like personalization but will only submit to it after you've developed a relationship with them. A similar paradox extends into your customer relationships. To give customers better service and to develop better product offerings, you need to know more about their preferences. But even though customers want better service, they may be loath to give you personal information.”

He then introduces Poneman, who offers his insight on segmenting U.S. consumers into three categories: privacy-centric (15 percent), privacy-sensitive (65 percent) and privacy complacent (20 percent).

Poneman: “The complacent don't care much; the sensitive will stop doing business with a company if something truly awful or offensive has transpired. But, perhaps most important, the privacy-centric will stop shopping at a particular store if there's a privacy breach.

Ok – I’ll buy that rationalization as long as he can back it up, which he does:

“There is a high, though not a one-to-one, correlation between the privacy-centric and high-income demographics—presumably because they have more to lose. It may be only 15 percent of consumers overall, but if it's 30 percent of your customers, not honoring their wishes and treating their privacy according could represent a lot of lost business.”

How do you feel about this? Working in a service industry with access to client information, we are always diligent in maintaining confidentiality of our client's information. As technology integration increases, we will continue to see challenges in this area.

Good food for thought. If we sold widgets, we’d be more concerned about privacy, but we sell our services, which brings with it a whole new set of criteria.

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As a follow up to my posting on Monday about XBRL, it’s coincidental that Rivet Software just announced that its Beta versions of Dragon Tag 2006 and Dragon View 2006 are now available for use.

What will this do for you? Make XBRL – a very complex process – a lot easier.

These two new versions of Rivet’s XBRL personal productivity applications contain new features and enhancements that continue to provide support for XBRL, making it easy for companies and regulators to adopt the worldwide standard for financial reporting.

Sounds good to me. Seems this also makes it easier to explain XBRL to customers and clients.

According to Rivet: Dragon Tag 2006 and Dragon View 2006 continue Rivet’s focus on providing easy-to-use and affordable XBRL applications to accounting and finance professionals that mask the underlying complexity sometimes associated with XBRL adoption.”

The new releases of Dragon Tag and Dragon View include the following new features:

• Multiple core/base XBRL taxonomies within a single company extension taxonomy for marking up both financial and non-financial information
• Automatic ratio calculation based upon information contained within XBRL financials
• Extended support for marking up more complex business report information requiring advanced XBRL taxonomy concepts (nested tuples, enumerations, choice elements, etc.)
• Ability to copy company extension taxonomies prior to making new/additional changes when marking up successive business reports
• Ability to export XBRL taxonomies, financials and calculated ratios into an already existing Microsoft Excel workbook
• Enhanced validation and review of markup information prior to creating XBRL financials

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A more technical topic for today’s blog: XBRL.

If you work in the accounting and finance areas of your company today, you owe it to yourself to read about XBRL (eXtensible Business Reporting Language). This information-sharing standard has been around for about five years, but has been slow to gain momentum in the Untied States.

Around the world, XBRL is growing fast and it will be only a short time before we finally catch up with the rest of the world.

A recent article on AccountingWEB talks about the SEC’s efforts to push our XBRL. Take a moment to read this informational link. It will be worth your time and enhance your knowledge base.

For the super geeks, check out XBRL.org.

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One of our most esteemed contemporaries in accounting and consulting is David Maister. I enjoy his blog immensely and think you will, too, because it hits on tons of current issues within the business environment – topics many of us are afraid to touch or read about for fear WE are the ones he’s talking about!

For example, his blog from April 9 called “Passion, People and Principles” covers what you should do if you are assigned work in which the task or outcome is unclear or confusing.

I don’t know about you, but this happens all the time!

David offers 11 remedies, and there’s something for just about every situation.

Check it out.

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From time to time, I will feature a Guest Spotlight - friends and associates who I believe are making a great impact on many of the topics I discuss in the blog.

Our first Guest Spotlight is from Kala Marathi, managing director of the Houston Angel Network. She has more than 10 years of operating and financial experience, and was formerly with Reliant Energy where she was a founding member of the corporate venture group, Reliant Energy Net Ventures, and led investments in home automation technologies. She has also worked with Continental Airlines and Chase Manhattan Bank.

It should come as no surprise that I’m going to talk about my favorite topic: angel investing. In specific, I’d like to talk about “How to find an angel investor.”

I ran across an article in Business 2.0 that talked at great length about ths topic. However, the article (and most articles on similar topics) talk about how to work with angel investors and not how to find them.

There are four ways to find an angel investor:

1. Network at organizations that tend to attract angel investors: Angel investors tend to work with several entrepreneurship-focused organizations in town. These organizations include, but are not limited to, BioHouston, HTC, MIT Enterprise Forum, Rice Alliance and Texas Entrepreneurs' eXchange (Texchange).

2. Get a professional reference: Your lawyer, accountant, banker and other service providers are a great source of referrals to angel investors. Most firms that I know of (such as PKF Texas) have thick rolodexes that they might be willing to leverage on your firm’s behalf.

3. Get a reference from your current investors: Ask your current investors to refer you to their friends and business colleagues who might be interested in investing in your company. Angel investors tend to have friends who are interested in the same sectors/topics, so one life science investor can lead you to more potential life science investors. These are (in my opinion) the best kinds of referrals you can get, because the referral comes from someone who has “skin in the game.”

4. Search the Web: There are several angel investment organizations across Texas, and almost every major city in the state either has one or is planning to create one. The benefit of these types of organizations is that you can get exposure to many angels at one time, and get coaching on how to work with angel investors. Contact your local angel investment organization and start a conversation. Two organizations to start with include the Houston Angel Network and the Angel Capital Association.

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I blogged over last weekend about the Rice Alliance's Business Plan competition, and am now pleased to report the winners of the 2006 competition.

According to officials, this 35 top MBA schools from around the globe competed at Rice University for over $260,000 in guaranteed prizes, an increase of 30% over the prior year. The grand prize was valued at over $165,000.

Overall Winners (There were 7 Finalist Teams):

Grand Prize Winner: Dartmouth College: Advanced Transit Enterprises: provides a patented tractor-trailer rear drag aerodynamics technology to improve fuel efficiency in the long-haul trucking industry
$165,000 in cash and services, including
- $100,000 Investment Prize from The GOOSE Society of Texas™
- $20,000 cash award from Shell Technology Ventures
- $45,000 in services from the Houston Technology Center, 1-service, Silver Fox Advisors, BrandExtract, The Padgett Group, and Continental Airlines

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I just across a new statistic from Infonetics Research, and if it is to be believed, then Houston, we have a serious problem.

For most of us, this problem is largely unpreventable.

According to a new study called “The Costs of Downtime: North American Medium Businesses 2006,” mid-size businesses lose an average of 1 percent of their annual revenue, or $867,000, to “downtime.”

Businesses with between 101 and 1,000 employees experience an average of nearly 140 hours of downtime every year, with 56 percent of that caused by pure outages.

The report says that “applications” are the biggest source of downtime, accounting for roughly 25 percent of the lost revenue, or $213,000 annually, with outages accounting for about two-thirds of that and degradations the other third. Service provider outages are also a significant source of downtime – something out of the control of the companies experiencing the downtime.

Infonetics studied seven sources of downtime: network products, security products, cables/connectors, servers, applications, service providers and e-commerce; and the four common causes: hardware problems, software problems, human error, and service provider error.

Now that I’ve scared you and myself, I’m not sure what could be done about it other than maintaining updated business continuation plans and backing up your systems on a continuous, regular basis.

You might even keep the golf clubs in the trunk just in case your power is out and it’s a nice day outside.

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