Jan 162017
 

Should a business spend a lot of time on its digital strategy? A recent article in the Harvard Business Review suggests many businesses, and consultants, are focusing too much on the technology.

Freek Vermeulen, an Associate Professor of Strategy and Entrepreneurship at the London Business School, describes how strategists may be making a mistake in responding to digital disruption. He argues many industries are learning the wrong lessons from disruptors like Amazon, Uber and Google.

In Vermeulan’s view, the world is not a globalised as we’d like to think and the network effects that work so well in internet based industries don’t necessarily translate to other sectors.

As a consequence, businesses that work on the assumption their industries will be affect the same way as, say, the taxi industry with Uber or newspapers by Google and Facebook may well be making their own strategic mistakes.

Digital is changing the nature of competitive advantage in many businesses – just like major technological developments have done before. However, the change will not be uniform across all industries. Digital technology is affecting and will affect different businesses in different ways. Miss these nuances and your strategic decisions could lead you seriously astray.

That’s certainly true and how technology or a rapidly changing economy affects each industry, or business, is far from uniform.

One of the case studies Vermeulan uses is that of a consulting firm that has largely eschewed digital platforms and focused on its human assets – primarily the skills and connections of its associates and staff.

While that’s undoubtedly true of all consulting businesses to some degree, the use of digital tools and marketing is changing that industry dramatically as well.

Vermeulan is right in that some industries may want to respond more slowly than others to digital or economic changes, however a business that disregards them or reacts too slowly may not know what hit it.

Jan 122017
 
how are we using data in our business

Last August the centrepiece of the Australian government’s digital dream came to an end. The Canberra Times this week described how “the Turnbull government has quietly killed off one of its biggest plans for ‘digital transformation’; the hugely ambitious gov.au website project”.

The abandonment of the project was an ignominious end of the plans for a Prime Minister who had promised so much at the time of his appointment, and that a cabinet submission would be pulled minutes before it was due to be tabled indicates the convoluted politics behind it.

Bizarrely, that story ran the same day the Federal Treasurer revealed the government would be running a ‘pilot project’ to put more services online as part of their attempts to harness the digital economy.

That the Australian Federal government is looking to run some pilot projects this year is remarkable given twenty years ago, in 1997, the then Prime Minister John Howard announced all appropriate government services would be online by 2001.

Australian taxpayers would be well justified asking what has happened over the last twenty years.

It could be argued that Australian governments are not particularly good at technology projects given ongoing disasters like the current Centrelink debacle, the failure of the 2016 Census and the collapse of the Tax Office’s portal shortly before Christmas.

Probably the main reason for Australian governments’ technology failures is the lack of focus, as shown by the Digital Transformation Office barely surviving one year.

That lack of focus is even more problematic as digital transformation projects are more about changing cultures than revamping technology, often making them a decades-long process.

Without a long term commitment to projects and policies, initiatives such as the Howard government’s 1997 Investing for Growth or Turnbull’s 2015 Innovation Agenda are doomed to failure. Until Australian governments commit to longer term visions, it’s unlikely any of their digital dreams will be achieved.

 

Aug 312016
 
Can overinflated job titles affect a business

Are senior executives lost when discussing their company’s digital strategy?

At the Huawei Connect conference this morning in Shanghai, Nigel Fenwick, a Vice President and principle analyst of Forrester Consulting, released his company’s study titled Business and Technology Leadership in a Post Digital Era.

Forrester surveyed 212 IT and business managers across selected markets in North America, Europe and the Asia-Pacific for the survey and found only four percent of business leaders were confident they understood their companies’ digital strategy.

Even more worryingly less than ten percent of business IT leaders claimed they understood their organisation’s digital strategies.

The reason for this, Fenwick believes, is the pace of change in the technology sector as managers struggle to put digital innovations into the context of the business.

Exacerbating this lack of understanding is how companies are ‘bolting on’ digital strategies to their existing business models rather than thinking about how their industries, products and markets are being transformed, Fenwick says.

There’s little new or surprising in Forrester’s report and the small and selective data set doesn’t inspire confidence in the survey’s results. It is however a good reminder of the challenges facing today’s boards and executives in understanding the consequences of a rapidly changing economy on their businesses.

Aug 282016
 

Last week Chilean power distributors signed a contract for solar generated power at the lowest rate ever, half the price of energy from coal powered generators.

As  the cost of solar panels continues to fall, the need for coal and gas powered facilities continues to dwindle but given solar panels don’t need to be located in a central location, the nature of distribution networks is changing.

With power generation becoming more localised, communities don’t need expensive connections to power grids. In disadvantaged regions and developing nations, villages that would have to wait decades to be connected, if at all, now have a pathway to dramatically improving their standards of living.

Distribution companies that exploited their monopoly positions in providing power across wide networks are now having to reconsider the value of their expensive assets and lucrative business models.

Those countries and companies who thought high coal prices would bolster their standard of living, such as Australia, must be rueing their focus on fossil fuels. The massive investments made by mining companies and compliant governments are now increasingly looking like stranded assets.

Aug 262016
 

Yesterday reports emerged that the icon of the disruptive economy, ride sharing service Uber, lost 1.2 billion dollars in first six months of this year.

Those losses show disruption doesn’t come cheap, although settling the damaging and costly battle with China’s Didi Chuxing will help the company’s cash burn.

Despite on track to lose at least two billion dollars this year, the company still has a substantial war chest having raised $8.7 billion dollars in debt and equity raisings over the last eighteen months.

While impressive, that war chest will only last four year at current rates and, given Uber’s already sky high 60 billion dollar valuation and the increasingly hostile Silicon Valley fund raising environment, it will be a relief to investors that the China battle appears settled.

There remains though an ongoing weakness in Uber’s business however with the company reportedly spending hundreds of millions a year in subsidies to drivers in key markets. How sustainable their business is remains to be seen.

In many respects Uber is following the Amazon example of beating down competitors by selling products at deep losses thanks to its access to capital and investors’ tolerance for building marketshare.

As we’ve seen with Amazon, that tactic has been wonderfully effective both in retail and in providing cloud services. For customers and the economy though, the reduced choices in the marketplace may end up not being in their interests.

Uber is an interesting experiment in how far the Amazon model can be pushed, for cities and states dealing with a deeply disrupted taxi and city transport network the results of that experiment may be telling.

Aug 182016
 

A common factor when talking to tech companies is their talk of disrupting industries, they themselves are not immune from change though.

This week networking giant Cisco announced they would cut seven percent of their workforce, nearly 5,500 employees, as the company deals with the shift to software defined networking equipment continues.

Industry commentators are warning Cisco are not alone as software and cloud based services change the tech industry with Global Equities Research’s Trip Chowdhry estimating the sector may shed up to 370,000 positions this year.

Today I had the opportunity to ask Autodesk’s Pat Williams, the company’s Senior Vice President for Asia Pacific, about the challenges facing companies transitioning to the cloud. At the beginning of the year Autodesk announced they would be cutting ten percent, over 900 jobs, as part of a structuring plan.

“I think there was a model that we had that as we moved to a subscription business that said we would see a bit of a drop in revenue and we realised our gross margins would be pressed,” he said.

“What we were trying to do was right-size the business,” Williams continued. “Sometimes you need to do that. It was a very intentional forward looking move we made.”

Autodesk and Cisco are far from the first tech companies to suffer from the software industry’s shift to the cloud. Microsoft have been probably been the business most affected by the change.

Cisco themselves have been dealing with this shift for a decade as well, with a major restructure in 2011 that saw 6,500 jobs cut.

What is clear in a transitioning industry is that Microsoft, Cisco and Autodesk are far from alone in making cuts. As Autodesk’s Williams points out, it’s probably best for managements to be doing this proactively rather than waiting for the changes to force their hands.

The stories of Cisco, Autodesk and Microsoft show all industries are facing changes. Assuming you’re safe in any sector is brave thinking.

Jul 142016
 

“A lot of companies are trying to figure digital disruption out,” says the Chief Operating Office of Infor, Pam Murphy. “For many companies they are seeing all this stuff and thinking ‘oh my god, what on earth do I do?’. They know they need to evolve and they know they have to evolve.”

Murphy, who joined Infor in 2011 after over a decade at Oracle, has seen a lot of that change. Infor itself embraced the cloud and in the company’s has been on an acquisitions spree as it seeks to expand its product offerings.

Having dealt with so many acquisitions – eight since Murphy joined five years ago – the company has become adept at absorbing new businesses. “It does require a lot of thinking that you’re going to be respectful of that,” she says. “A lot of stuff is easy to standardise but culture is difficult.”

Another area that Murphy doesn’t see as being standardised is in developing talent. “You have to be open minded,” she says in answer to my question about encouraging women into senior roles and increasing the diversity of senior management.

Murphy’s main advice to business leaders is not to shy from the business world’s shifts, “embrace the change.” She says, “don’t think of it as being something that’s scary and threatening, get ahead of it. Embrace the fact we’re in a completely different era.”