Last week I posted a long interview with Kevin Ashton, the man who coined the ‘Internet of Things’ tag, on startups, innovation and how the media manages to misreport technology. It was a good, but lengthy, interview.
The good folk at Smart Company have rewritten the piece into a much more readable story so if you thought the first post was tl;dr – too long; didn’t read – then you may find the edited version much more concise and useful.
The industry that benefited most from the economic reforms of the last twenty years of the 20th Century was the banking industry.
With the elections of Margaret Thatcher and Ronald Reagan three decades of good times began for the banking sector.
Now the good times are drawing to a close warns former Barclays boss Antony Jenkins who told a London audience how the banking industry faces an ‘Uber moment’.
While Jenkins focused on the fortunes of branches and frontline staff, the technological change facing almost all aspects of banking from tellers to risk analysts and upper management are all facing massive changes as artificial intelligence moves into fields that a few years ago most believed couldn’t be automated.
For the incumbent banks shareholders this is mixed news, on one hand it makes their existing operations vastly more profitable – the One Percent become the .001%.
On the other hand for the incumbents, the market is opening up new competitors and as Jenkins points out some of these disruptors will be the banks of the future. At the moment though established banks will do all they can to interfere with new entrants.
While interference will only go so far, the real challenge is to get ahead of the changes which is why financial technologies (fintech) has become such a hot topic in the last three years with major banks sponsoring or opening their own incubators, accelerators and hackathons.
Another important aspect in a changing environment is that of regulation and with the banks winning from the deregulations of the 1980s and 90s it may well be that we’re going to see a tightening on their powers as technology changes the playing field.
One thing is for sure, bankers are about to find times as exciting and challenging as many of the industries they displaced late in the Twentieth Century.
In the early 1990s I was working for a British company in Hong Kong and regularly commuting to Taipei. On a Cathay Pacific flight back from Taiwan one Friday afternoon, I found myself on the same flight as the organisation’s Asia-Pacific director who graciously got me into the lounge for a beer.
Over that beer he told me how earlier in the year he’d been asked by one of the pukka English directors why he was bothering spending so much money in business development for ‘third world countries’ like Taiwan and South Korea.
Jeff, as we’ll call the director, laid down a challenge to his board. “Come out and have a look for yourself,” he told them.
Some of the UK based directors took Jeff up and flew out to Hong Kong, first class on BA of course, and then continued on to Taipei where they suitably amazed to be greeted by a first world city.
“They genuinely believed they were going to fly in a DC-3 and be met by a bunch of rickshaw wallas,” laughed Jeff, a long standing English expat. “The Brits don’t get East Asia.”
It seems things haven’t changed much as veteran venture capital investor Mike Moritz made a similar point at a speech in London yesterday that the West doesn’t understand China, particularly Europe.
“People underestimate China, especially in Europe,” Business Insider quotes Moritz as saying. “They have very little sense of the size, strength, and scale of ambition of the leading Chinese technology companies.
Moritz pointed out the fund he leads, Sequoia Ventures, is now placing over half its money in non-US companies with Chinese businesses being high on the list.
The West’s misunderstanding of China goes beyond business, with The Economist warning that many nations are soon going to have to choose between the PRC and the United States as Beijing sets up its own network of global alliances and trade accords.
So far the United States has responded to this with clumsy efforts like the Trans Pacific Partnership, an attempt to quarantine China’s influence in the Western Pacific that actually gives PRC based businesses a competitive advantage over nations that enter the deal which does little more than strengthen US corporate interests.
Already in Africa, the results of China’s economic efforts are being seen. A good example is the new Ethopian Railway where the Chinese were quick to fund a project that EU and World Bank lenders had dragged their feet on.
Just as English businessmen in the 1990s misunderstood what was going on in East Asia, it seems ignorance of Chinese growth and intentions are even more widespread today. There may be some shocks coming for countries like Australia who assume today’s realities are tomorrow’s.
Are we seeing a new digital divide develop between big and small businesses, particularly in areas like retail and hospitality?
This thought occurred to me during a radio spot earlier today where we were talking about Apple Pay’s Australian launch. Many small businesses don’t have the capital or expertise to implement many of these new technologies.
A number of factors contribute to this including the legacy systems installed in small businesses, the proprietors having a poor understanding of technology and, most importantly, the lack of either capital for reinvestment or cashflow to fund the monthly charges that are standard for cloud computing services.
One unstated factor with cloud computing services is how the cost of services add up. For example a Premium 10 Xero customer with Receiptbank attached is looking at a $100 a month in charges. It’s not hard to see how adding cloud based Point of Sale, rostering and customer service software could see a small business incurring $400 a month in fees, throw in Salesforce and you could be looking at a very expensive exercise.
No doubt for those companies that can afford these services this is money well spent but for many margin or low turnover businesses, the charges could be a deal breaker.
Another aspect to the cloud services is the myriad of different platforms that need to be stitched together in most businesses, one cloud service founder calls it “digital spaghetti.”
Managing this bowl of complexity isn’t easy and raises a number of business risks as different services apply varying policies and practices to the data they collect and store. A breach or service failure at one could cause a ripple effect through all business operations.
For many small business owners, particularly older proprietors, managing this complexity is intimidating if not downright scary.
It may well be there’s a number of opportunities for a canny service provider to offer an out of the box small business solution, but for many older small operators with limited capital and restricted cashflow affording such a product might also be difficult.
The risk though for those businesses is they will find themselves falling further behind as markets, consumer demands and the workforce’s expectations evolve. A business digital divide could be fatal for those caught on the wrong side of it.
Things are going crazy in the Israeli startup scene as investors and multinationals and startup pile into the country’s tech sector.
In order to understand what’s happening I spent the morning at The Bridge, an Israel Australia Investment Summit staged by the Israeli Trade Commission and Invest in Israel.
Of the morning sessions, the two panel segments gave the most insight into what’s driving the Israeli tech sector with Nimrod Kolovski of Jerusalem Venture Partners emphasising the industry-g0vernment-academia collaboration, military spending and tight personal networks.
“In Israel we can make two phone calls – to someone who was with them in the army and to someone who they worked with at the last company. You don’t get a chance to repair your reputation in Israel,” says Kolovski of those tight personal networks.
Kolovski also highlighted an important part of venture capital culture – just as much in the US as Israel – is the willingness to admit failure, “if you don’t then you’ll lose credibility”.
The broad message from the morning’s sessions is that the Israeli tech sector happens to have the combination of factors that aligns with the Silicon Valley and US corporate view of the world coupled with a strong underpinning of high level, defense led research and personal networks forged to a large degree during National Service.
For a long time I’ve been skeptical of the Israeli and Silicon Valley model being replicable in other countries, particularly Australia, and the morning’s sessions only confirm that view. There is more to this which I intend to explore in some future blog posts.
The lesson for other countries though is that personal networks, research and access to capital matter in creating new industry hubs. The challenge for each country or region is to find the combination that plays to their society’s and industry’s strength.
For Israel, it’s hard to see how their tech sector isn’t going to continue to thrive in the current climate however it’s the result of long term focused investments, research and policies. Taking the long view is probably the most important lesson of all.