Paul Wallbank | Paul Wallbank - Communications Professional

Uber and the evolving business model

Where does the future lie for car hire service Uber?

Last year we looked at Uber and speculated the software that runs the business positions the company to be more than just a hire car booking service with applications in logistics and other sectors.

This week Uber’s CEO Travis Kalanick is getting plenty of coverage in the media with extensive profiles in both the Wall Street Journal and Wired.

Wired’s profile of Kalanick and Google raises Uber’s potential in logistics, funded by a $258 million fund raising led by Google Ventures last August.

“We feel like we’re still realizing what the potential is,” he says. “We don’t know yet where that stops.”

While Wired speculates about how Uber would perform against Amazon and Walmart, the car service is different in being more of a big data play than its established, possible competitors.

The three businesses would be very different creatures in the way they would address consumer markets, it may even be that Uber is more suited to being a B2B or wholesale operation rather than a retailer like Walmart.

Interestingly Kalanick looks at a target of 2,000 staff by the end of this year reports in his Wall Street Journal interview.

Mr. Kalanick: We have 550 employees. That’s approximate. We’re definitely going to be well over 1,000, maybe in the 1,500 to 2,000 range [by the end of 2014].

Having a staff target so high is interesting, it certainly indicates Kalanick sees plenty of growth ahead in the business.

What’s coming in tech for 2014 – ABC Nightlife computers

On ABC Local Radio we’ll be looking at the big tech stories for 2014

For the first Nightlife tech spot of 2014 Paul will be joining Kate O’Toole to look at what’s going to big technology news in the year ahead.

The show has been and gone. If you missed it, you can download it from the ABC Nightlife website.

A lot of this year’s technology stories will be around things we’ve been talking about for a while, but a wave of cheap devices is making things like the connected car and smart house more affordable and accessible to homes and businesses.

The Connected car

While it’s early days for the connected car, in the near future we’ll see them talking to intelligent roadsigns to reduce the roadtoll and to our smart houses to let our airconditioners and kettles know we’re on the way home.

2014 is going to see these vehicles become common, by the end of next year we’ll be expecting most models to have these features.

Wearable tech

We’ve been hearing a lot about Google Glass, but the real advances in wearable tech are in devices like the Fitbit that tracks your daily exercise.

The next wave of wearable tech will be intelligent clothing, a good example of this is the Mimobaby kimono that measures a baby’s movements and repiration during the night.

The Internet of Things

One of the truths of the tech industry is that it loves buzzwords – in recent years we’ve had social media, cloud computing and crowdsourcing – the next big one is The Internet of Things.

The Internet of Things deserve the hype. With cheap sensors, accessible internet and cloud computing it’s now possible to connect, monitor and analyse everything from cows to refrigerators. This will have big effects on most industries.

Smartphone wars

For the past few years we’ve seen the iPhone and then Android, primarily Samsung phones, dominate the smartphone market. This is about to change as a wave of cheap Chinese phones flood the market.

Expect smartphone and tablet prices to fall dramatically as a range of new devices appear on the shelves. We will probably see Apple and Samsung respond by increasing the features available on their more expensive, higher margin devices.

3D Printing

Another technology that’s become affordable in recent years is 3D printing. At the CES show, a new range of 3D printers was released that have cameras so you can make copies of items.

3D printing is rapidly gaining acceptance and the worldwide makers’ movement is showing what we can do with these machines.

National Broadband Network

In Australia the NBN will continue to be the biggest local tech story. Unfortunately the project will remain mired in contractual and political problems as the government tries to figure out exactly what it wants to build.

While Australia plays games, the rest of the world is getting on a building their networks and Australians can expect the country to fall further behind the global leaders on almost every measure.

Security

With the revelations of Edward Snowden we can expect security and privacy to be an ongoing story in 2014.

As corporations and social media companies struggle with the challenge of storing and protecting customer’s data, there will be more discussion of how we can protect our vital information both on and offline.

We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

Tune in on your local ABC radio station from 10pm Eastern Summer time on Thursday, January 10 or listen online at www.abc.net.au/nightlife.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

Launching Networked Globe

Network Globe aims to be one of the main sources for information on the Internet of Things

Out of the last six months of travelling, a new project has been born. Networked Globe is intended as a clearing house for news and opinion on the Internet of Things, Machine to Machine and all the technologies that surround these industries.

The intention is to have a daily update on industry news along with two or three feature pieces a week to start with. If gets legs, and an income, then we’ll be looking at extending the coverage.

Finding things to cover certainly won’t be a problem, equipment vendors and telecommunications companies are pouring into the space and security issues are already becoming a major concern, as this story on the vulnerabilities of home automation illustrate.

Hopefully this blog won’t be neglected as the focus shifts to Networked Globe, although there’ll probably be more posts about the usual rollercoaster ride about setting up a business.

Connecting the vending machine

Vending machines are leading the way in adoption of the internet of machines

Wired Magazine’s Klint Finlay speculates why Coca-Cole would want sixteen million MAC address for their vending machines.

That Coca-Cola has connected all their vending machines shouldn’t come as a surprise, probably the only thing moderately unusual from this story is that the soft drink company organises its own hardware rather than getting the machine manufacturers to do it.

Vending machines being connected isn’t new, back in the days of dial up modems some of the more advanced one would use phone lines for basic diagnostics.

Today most vending machines have a cellular connection used for payments, stock monitoring, fault warnings and vandalism detection.

A visit to my local swimming pool today showed this, the Coca-Cola branded machine machine outside the change rooms offers credit payments and in the not too distant future will probably include some sort of NFC type option.

On top of the the machine is a little aerial for the back to base communications. So the device can validate and bill cards, report back when stock levels are low and alert operators to anything untowards happening.

A big opportunity for the soft drink companies and their distributors is analysing the information about buying patterns at various locations — it’s a classic Big Data play.

So it’s not surprising Coca-Cola has registered a block of MAC addresses as the company will probably need several more 16 million blocks in the not too distant future as more of their operations from bottling plants to vending machines require unique connections.

Vending machines are a small but obvious example of how the internet of things is evolving, in the near future most consumer devices will have similar options.

Falling out of love with Google Glass

How the pundits turned against Google glass is a lesson in tech media management

Media hype is normal in the tech industry, it’s common for a new product to receive swooning coverage in its early days but when the press falls out of love with a device, it can be a harsh breakup.

Google Glass is suffering one of those harsh breakups with with writers and bloggers who were formerly gushing over the product now being publicly unimpressed with the product.

First out the blocks was Wired’s Matt Honan who described his year as a ‘glasshole’.

Honan is enthusiastic about the future of wearable devices but doesn’t see Google Glass as being ready for prime time.

Which is to say, I’m really, really excited about where Glass is going. I’m less excited about where it is.

Adding to the anti Google vibe was tech maven Robert Scoble who after his year of using the device decided it was too expensive and clumsy.

Scoble’s point is the current generation of wearable tech is too clunky and user unfriendly to solve the problems it hopes to address.

Daring Fireball’s John Gruber — who wasn’t one of those gushing over Google Glass — points out this is the exactly why Windows XP tablets were such a failure in the marketplace.

Gruber also points out another similarity between Google Glass and Microsoft’s attempts at a tablet computer. Each company’s staff were reluctant to use them.

When your own employees don’t use or support your product, the problem is with the product, not the employees.

The eating your own dog food mantra cuts both ways; if your own staff find your products unattractive, then you can’t expect customers to warm to them.

In some ways it’s ironic that Google are receiving press scorn as the company plays the tech media like a violin with privileged insiders getting early access to products create an aura of exclusivity.

Glass was a classic example of this with a small group of tech journalists getting access to the product, unfortunately those insiders are turning out to be less than impressed.

Even if it turns out the Google Glass is a failure, it will have been one of the company’s brave moon shots and no doubt what they’ve learned in usablity and mobile data will be very useful to other parts of the business.

Regional pains – what happens to communities when industries close?

Upstate New York and rural Australia may give us some clues to how regions will evolve in the 21st Century

Yesterday’s post on Chobani Yoghurt rescuing a town in Upper New York state raises some questions about what happens when a major industry leaves.

For South Edemston, the question went unanswered as Hamdi Ulukaya and Chobani saved the day, but other towns haven’t been so lucky.

Australia’s Goulburn Valley, about a hundred miles north east of Melbourne, may be about to find out as the main local fruit cannery will close down unless the state and Federal governments each contribute $25 million to an investment plan.

Closing the region’s major cannery will have dire consequences for the local economy as the industry has been a major customer for the local fruit industry. Without the cannery, many of those peach, pear and apple growers have nowhere to sell their produce.

Already farmers are bulldozing their trees and grubbing up the roots as the market works against them.

So what happens to the Goulburn Valley if the canning industry leaves? Do the orchards get turned over to goats?

There is a precedent in Australia for this, in Tasmania the ‘Apple Isle’ has seen its orchard industry steadily decline from the days of peak production in 1964.

A touching story in The Griffith Review by Moya Fyfe, the daughter a former Tasmanian apple farmer, describes when her father’s orchards were ripped up.

So in the winter of 1974, his life’s work, and that of his father, was bulldozed into windrows of gnarled stumps and roots. Acre after acre of once productive apple trees, captured in a photograph hanging on my parents’ dining room wall as picture-book hills awash with blossoms above North West Bay, were twisted and torn from the ground and left in undignified heaps to rot.

Moya’s father was given an exit package – a cash payment to find something else to do – by the state government. Something that many agricultural communities around the world have become familiar with.

The problem for Tasmanians was that there wasn’t really much else to do. At the time Moya’s farm was ripped up there was a belief the state would become an industrial powerhouse on the back of cheap hydroelectricity, but that never happened.

Tasmania’s economy continues to struggle and Moya’s article was part of a Griffith Review edition focusing on the state’s struggles.

The most pubilicised essay was a scathing analysis of the state’s culture by Professor Johnathan West, who identified the real problem for Tasmania as being a dependency mindset.

These numbers suggest that as little as a quarter to a third of Tasmanian households derive their livelihood from the genuine private sector. Of them perhaps a third gain their income from wholesale and retail trade and associated logistics, another third from residential and commercial construction and maintenance. The clients of both these groups depend largely on public-sector incomes, leaving only about 10 per cent of all households making a living from the traded private sector.

Interestingly both Johnathan West and Moya Fyfe are employed by the University of Tasmania, which probably proves the Professor’s point.

Overall Tasmania relies upon Federal government funds to survive, receiving over $1.50 in payments for ever dollar remitted in taxes; in that it joins half of Australia’s states and territories in being economically dependent on the Federal taxpayer.

That’s not a good sign for the Goulburn Valley or for the state of Victoria which increasingly is appearing to be to Australia what Spain was to the European Union circa 2007 or Miami to the US in 1927. When the Melbourne property market pops, the region could be in deep trouble.

For much of regional Australia – like disadvantaged parts of the European Union or the United States – communities have become dependent on transfers from the central government, the sustainability of that is being tested now.

It may well be that South Edmenson’s experience with Chobani illustrates the most sustainable way governments can support these regions, attracting entrepreneurs and new industries into communities that are being left behind is far better than leaving them on welfare.

Image courtesy of elcapitain through Flickr

A tale of three cities and three different government programs

The stories of how governments have helped Chobani yoghurt, ESPN and Pfizer are an interesting contrast on how government support can help business.

Three different business; Chobani yoghurt, ESPN and Phizer are an interesting contrast on how government support can help business and get a real return for taxpayers.

When Kraft Foods decided to shut down its South Edmeston yoghurt plant losing the 55 remaining jobs was a blow to the hamlet of 2,000 in upstate New York.

Eight years later the plant is in new hands, employs 600 people and is the centre of the United States’ thriving Greek yoghurt industry.

In 2006, Hamdi Ulukaya bought the dilapidated factory from Kraft to produce yoghurt similar to what he was used to in his native Turkey and today Chobani is one of the fastest growing food brands in the United States.

Ulukaya tells the story of Chobani in the Harvard Business Review and how the company has grown without any external investment, instead relying on bank finance and government supported guarantees.

Key to Chobani’s founding were the US Small Business Administration loan guarantee program that enable the entrepreneur to buy the mothballed Kraft plant.

While Chobani is a success of the Federal government’s program, just over a hundred miles away the Connecticut state government is pouring money into the maw of ESPN to keep the company’s head office in the town of Bristol, the New York Times reports the company has received nearly quarter of a billion dollars in subsidies in just over a decade.

ESPN has received about $260 million in state tax breaks and credits over the past 12 years, according to a New York Times analysis of public records. That includes $84.7 million in development tax credits because of a film and digital media program, as well as savings of about $15 million a year since the network successfully lobbied the state for a tax code change in 2000.

Notable amongst ESPN’s benefits are the credits under the state’s film and digital media program. As we’ve discussed on this blog in the past, the movie industry plays a cynical game or playing off governments and its no surprise that cable networks would do the same thing.

Connecticut has a bad track record in industry incentives, the destruction of much of the town of New London is a poster child of what governments shouldn’t do when trying to build new industries or attract large corporation.

New London’s demolition of an entire suburban district for the never built head office of pharmaceutical Pfizer is testament to what can go wrong when government officials are dazzled by big promises from large corporations.

Unless support is appliedstrategically and sensibly, competing against other communities to attract big corporations, sporting events or major projects is a zero-sum game that ultimately sees the taxpayer a lose.

While Chobani created 600 jobs in South Edmeston at no net cost to the taxpayer it’s likely Kraft would have demanded tens of millions of dollars in NY State taxpayer support for retain fraction of the jobs that the new business created.

Invariably modest small business programs prove to be a better bet for taxpayers than dumb corporate welfare, unfortunately governments around the world prefer to throw money at big business as they are the ones that write the campaign cheques and employ retired politicians.

Sadly in an era where corporate welfare is the norm rather than the exception, we can expect to see more ESPN type deals and fewer Chobanis with the taxpayer being the poorer for it.

When a politician proudly announces the number of jobs being created through their subsidies to a large corporation, it’s worthwhile for local taxpayers to take the spending of their money with a large grain of salt as history is not on their side.

Image courtesy of jprole through sxc.hu

2014 – the year privacy and security will be defined

Security will be the big technology story of 2014

Happy New Year – 2013 might have been a disappointing year for tech, but for many it was a weird, wild roller coaster ride. Hopefully that ride is going to result in some very interesting destinations in 2014.

It’s tempting to make predictions about 2014 and wise heads prefer not to – what I’d refer to is a failed prediction from 2011, that that year would be remembered as the year of the security breach.

That was wrong. 2012 was worse and 2013 continued the trend of ever increasing corporate glitches and finished the year with two massive security breaches at Target and Snapchat. 2014 promises to be a year when the stakes become higher.

And then there were Edward Snowden’s revelations. Everyone who’s worked in or reported on the tech sector knew security agencies had the ability to snoop on the data of anyone they thought might be of interest, but few of us thought they would have engaged on such massive sweeps of the planet’s personal and business data.

Snowden’s leaks and the fallout from them have a long way to play out and the big story is going to be how the US justice system reacts to the creation of a surveillance state.

In countries like Australia that lack the US’ constitutional protections, fighting the constant spying of government agencies is probably a lost cause unless an economic collapse sees the authorities running out of money to operate their comprehensive monitoring programs.

What we can be certain of in light of ongoing privacy breaches by governments and businesses that the technology world is going to obsessed about security. That’s probably going to be the big, ongoing story for 2014, even if the mainstream media outlets focus on big TVs and the latest smartphone.

So Happy New Year and play nice on the internet. The Feds are watching.

King Canute and Google: When the algorithm is wrong

As society and business drown in big data we’re relying on algorithms and computer programs to helps us wade through the masses of information, could that be a weakness?

As society and business drown in big data we’re relying on algorithms and computer programs to helps us wade through a flood of information, could that reliance be a weakness?

British Archeology site Digital Digging discusses how Google displays Manchester United winger Ryan Giggs in the results search for Cnut, the ancient king of Denmark better known in the English speaking world as King Canute.

Apparently Giggs appears in the search results for Canute because of the footballer’s futile attempt to hold back a tide of information about his love life.

While Google’s algorithm seems to have made a mistake, it’s only doing what it’s been programmed to do. A lot of trusted websites have used the term ‘Canute’ or ‘Cnut’ in relation to Giggs so the machine presents his picture as being relevant to the search.

Confusing Ryan Giggs and King Canute is mildly amusing until we consider how critical algorithms like Google Search have become to decision making, there are no shortage of stories about people being wrongly billed, detained or even gaoled on the basis of bad information from computers.

The stakes in making mistakes based on bad information are being raised all the time as processes become more automated, a chilling technology roadmap for the US military in Vice Magazine describes the future of ‘autonomous warfare’.

By the end 2021, just eight years away, the Pentagon sees “autonomous missions worldwide” as being one of their objectives.

Autonomous missions means local commanders and drones being able to make decisions to kill people or attack communities based on the what their computers tell them. The consequences of a bad result from a computer algorithm suddenly become very stark indeed.

While most decisions based on algorithms may not have the life or death consequences that a computer ordered drone strike on a family picnic might have, mistakes could cost businesses money and individuals much inconvenience.

So it’s worthwhile considering how we build the cultural and technological checks and balances into how we use big data and the algorithms necessary to analyze it so that we minimise mistakes.

Contrary to legend, King Canute didn’t try to order the tide not to come in. He was trying to demonstrate to obsequious court that he was fallible and a subject to the laws of nature and god as any other man.

Like the court of King Canute, we should be aware of the foibles and weaknesses of the technologies that increasingly guides us. The computer isn’t always right.

Chinese earthmovers move up the value chain

The Chinese construction equipment industry shows how the nation is moving up the value chain

After yesterday’s post on the motor industry’s relevance in the 21st Century, a related article about Chinese construction equipment appeared in The Economist.

According to CLSA – formerly Credit Lyonnais Securities Asia and itself now fully owned by Chinese investment house CITIC – the quality of Chinese construction plant is rapidly approaching that of the Japanese and US industry leaders.

The Chinese have achieved this in a short period through a combination of joint ventures and strategic takeovers and that should worry its more established competitors.

How the Chinese have moved up the value chain in construction plant is a small, but important example, of how the country is positioning itself as a higher level producer as its economy and workforce matures.

For trading partners and competitors it’s worthwhile thinking how a more affluent and higher tech China is going to affect their businesses, thinking of China as just a cheap source of low quality labour isn’t going to cut it for much longer.

Does the motor industry matter in the 21st Century?

Is the automobile industry the driver for 21st Century economic growth?

One of the key drivers of Twentieth Century industrialisation was the motor industry. Today it’s an industry plagued by over production, distorted by government subsidies and increasingly dominated by a small group of major players.

In Australia, the Productivity Commission examined how the motor industry was evolving and its preliminary report (PDF) is a good snapshot of the current state of play in the global automobile sector.

Chronic worldwide overcapacity is what stands out most starkly in the report with most of the world’s manufacturers operating at less than the 80% production break even point that’s assumed in the industry.

Australia is a good example of how the motor industry was held as being essential to a country’s development. Like most of the world, the early Twentieth Century saw dozens of small automobile manufacturers pop up in the backyards of enthusiastic tinkerers – it’s like the surge in smartphone apps today.

Eventually only a handful survived the industry shakeout following the Great Depression and by the end of World War II the industry was largely dominated by US, British and European manufacturers, today that consolidation has increased with East Asian producers replacing the UK carmakers.

The lessons of World War II

One of the lessons from World War II was that having a strong domestic manufacturing industry was a nation’s strategic advantage. So governments around the world protected and subsidised their automobile industries along with other factories.

For Australia, bringing in the required labour to run those manufacturing industries was a seen as a key to the nation’s post World War II growth and it was one of the contributors to the country’s ethnic diversity that started to flower in the late 1970s.

Today the echoes of those policies remain with governments around the world still subsidising their motor industries despite the economic and strategic military benefits of automobile manufacturing being dubious at best.

Australia’s failure

In Australia the modest incentives provided by governments hasn’t been enough to keep local car plants operating, which was the reason for the Productivity Commission’s report into the future of the industry.

The report’s message is stark for Australia, as a high cost nation that hasn’t invested in skills or capital equipment there’s little reason for the world to buy Australian technology as there’s little being built that the world wants or needs.

With the nation’s advantages in agriculture and mining – not to mention solar power – Australia should be leading in technologies that exploit these advantages but instead the nation is a net technology importer in all three of those sectors.

To be fair to Australian industrialists, they responded rationally to government policies that favour property and share speculation over productive investment. Coupled with the drive to create duopolies in almost every sector of the Aussie economy, it didn’t make sense to invest when they could exploit domestic markets rather than invest in new technologies.

Becoming high cost economies

For nations moving up the value chain such as China, Thailand and Brazil; Australia’s failure to develop high tech manufacturing and inability in adapting to being a high cost economy is a powerful lesson in the importance of framing sensible long term economic policies.

The Australian Productivity Commission report illustrates how the motor industry does have a role in helping countries move into being industrial powerhouses, but once a nation becomes a high cost economy it takes more than dumb subsidies to maintain a competitive advantage.

Germany and the US illustrate this, and the fact both countries’ motor industries are running at greater than 80% capacity shows how their automotive sectors are evolving. It’s no co-incidence that electric car manufacturer Tesla Motor’s plant in Fremont, California was a former GM-Toyota joint venture factory.

As motor vehicles become increasingly clever so too are their manufacturers; unless car builders and governments are prepared to invest in the brains of their workers and modern technology then they have little future in the 21st Century.

For nations, the question is whether the Twentieth Century model of building a car industry is relevant in this century. It may well be that other industries will drive the successful economies of the next hundred years.

Big Data, retail and the 80/20 rule

Retailers are using big data to apply the 80/20 rule – or Pareto’s Law – to reduce returns and shrinkage

Sorting out troublesome customers is one of the major benefits that big data offers businesses, a profitable example lies in reducing returns to online stores.

One of the banes of online retail is dealing with returns, the industry pioneers overcame objections to shopping over the web through no-questions-asked returns policies that’s trained customers into expecting they can send items back regardless of the reason.

The Frankfurt School of Finance and Management’s Christian Schulze surveyed nearly six million internet transactions and found returns are effectively costing online retailers half their profits, as The Economist reports.

Leaving that sort of money on the table is painful for any business and online retailers are trying to find ways to reduce those return costs by sacking their customers;

But this risks a backlash: rejected shoppers are likely to rush to the newspapers or social media to complain—and their gripes may turn other, more profitable customers against the firm.

Much of this comes down to Pareto’s Law, that 80% of your problems will come from just 20% of customers, and a key imperative in business is to get the troublesome, high maintenance customers buying from your competitors without being too obvious.

Identifying those troublesome customers is where Big Data comes into play, coupled with intelligent analytic tools businesses are able to identify who is more likely to return a product or dispute a bill before the sale is made.

As the Wall Street Journal reports many online retailers are exploring ways they can reduce the return rates using Big Data and analytics.

By giving buyers access to their purchasing history stores are able to suggest when a customer is buying something that isn’t appropriate or the wrong size.

The WSJ cites fashion retailer Rue La La, which lost $5 million in returns last year, as an example.

For instance, a customer who has continuously bought the same brand of dress shirts in both a small and a medium might see a note pop up saying: “Are you sure you want to order the small? The last five times you ordered both sizes, you only kept the medium,” Chief Executive Steve Davis said.

Another tactic for retailers is to discourage frequent returners from buying high margin goods through targeted vouchers and offers. One point the WSJ article makes is how differential pricing is going to be applied – if you regularly return goods then expect not to be offered the best discounts when you visit the retailer’s website.

Many returns though are the result of genuinely dissatisfied clients and this is where improving customer service kicks in, the WSJ describes how some retailers are now providing video tutorials for their products and increasingly smarter customer service can be used to avoid returns.

With the increased sophistication of customer analytics and support tools, we’ll see online retailers squeeze more profit out of their businesses as well as look after their most profitable clients.

The problem for ‘bricks and mortar’ retailers not deploying new technologies is they won’t have the tools to compete with their savvier online rivals.

A good example of legacy managers struggling in the face of chronic under investment are Australian retailers and this week the Myer department store chain had to shut down its online outlet after the system collapsed.

There is no timeline on when Myer’s website will be back up. It’s a tough time for those retailers that haven’t invested in modern system and an even tougher time for companies with legacy managers like those at Myers.

The use of big data in analysing shopping behaviours is one area where well managed retailers will out perform their poorer rivals, it’s hard to see how companies like Myer will survive in the modern era of business.