Feb 272017
 
government subsidies for film industry hurt the sector

With the movie industry’s Academy Awards taking place last night, albeit not without mishaps, it’s worth reflecting on how Hollywood has defended itself against a range of disruptions over the last century.

From when the first movie was shown by the Lumiere brothers in Paris just after Christmas 1895, cinema has been both a disruptive force and one that’s been subject to its own challenges.

The immediate effect of the new technology was an explosion of new businesses, trades and techniques not dissimilar to the first dot com boom of the early days of the web as the traditional theatre industry was displaced by movie theatres.

As the  technology evolved, the movie industry itself was subject to disruption as sound was developed – ending the careers of many silent film stars – followed by colour both of which allowed new techniques and markets to developed.

Then came television and, it would have seemed, the end of the movie industry. Although that didn’t happen and it’s instructive how the industry reacted to the challenge.

In a 2007 paper, academics Barak Orbach and Liran Einav showed the movie industry’s evolution starting just after the introduction of talkies in 1927.

The shift to sound drove the movie industry to its all time heights prior to the Great Depression, however the economic downturn hit the film business hard – something to consider when people talk about the ‘lipstick effect’ -however steady growth returned through the 1930s and until the end of World War II.

Following the war, economic change and the arrival of television were tough for the movie business as attendances fell dramatically until stabilising in the late 1960s. Interestingly, the price of movie tickets went up dramatically shortly before the decline tapered off.

The graph finishes at 2002, at the end of the first internet boom and it’s notable the early days of the web, or the rise of Pay-TV in the 1970s and the Video Cassette Recorder in the 1980s had little effect on the industry’s attendance figures.

Despite those new technologies, the movie industry managed to attract audiences despite the plethora of entertainment options on offer at home.

Much of this was due to technological change with advances in computer generated graphics and recording techniques giving film makers far more creative scope while the roll out of multiplex cinema complexes allowed patrons far greater choice in movies.

Fifteen years later the effects of technology are still telling. In 2002, the average American was buying five movie tickets a year, according to the 2016 Motion Picture Association of America’s annual report this had fallen to 3.8, no doubt partly due to the success of Netflix.

However the film industry has still remained lucrative, partly through developing alternative streams of income like product licensing and international sales – China is by far the US industry’s biggest market and non-North American sales are growing by 21%. At the consumer level, movie houses increasingly make their money from concession sales and add-ons like premium seating.

So the answers to the movie industry’s success in staying profitable in the face of disruptive technologies seems to be in adopting new tech, diversifying income streams and globalising their product – although a bit of legislative protection in extending copyright probably helps.

The lessons though from a century of disruption though are clear, how well the movie industry responds to continuing disruption from the likes of streaming services like Amazon Prime, Netflix and their Chinese equivalents remains to be seen.

Feb 202017
 

Last week the City of Sydney and councillor Jess Scully came under fire for an apparent backflip about the need for a Chief Digital Officer.

Scully, who was elected at last year’s council elections, told InnovationAus “the idea of a CDO or chief innovation officer seems a little bit redundant” a day before the organisation advertised for ‘chief, technology and digital services officer’.

To be fair to Scully, the roles being advertised by the City of Sydney were not truly CDOs in the way Brisbane, which has a small business focus, and Melbourne’s city councils have appointed them however it raises the question of whether Scully is right that an organisation doesn’t need a Chief Digital Officer.

As with most questions of this nature, the answer seems to be ‘it depends’. A key part of that discussion is where a CDO sits in an organisation. If they are senior executive or even board role, then it’s likely they are going to come into conflict with other c-suite managers such as the COO and CFO.

What’s worse, such a conflict in the c-suite can mean digital issues can be seen as ‘belonging’ to the CDO and not other key business units, which can only be to the detriment of the organisation.

There’s an argument too that the changes to organisations is so great from the changing economy and emerging technologies that responsibility of understanding and dealing with these changes is the role of the CEO and the board.

Where a CDO can be very effective is being an advocate for change and a trusted adviser to senior management, however even there risks lie as identified by Paul Shetler who found the siloing of agencies within the Australian Public Service meant it was very hard to effect any change in the face of resistance from an organisation’s vested interests.

It seems from the story that the City of Sydney has chosen an advocate and support role for the digital officer position, rather than formalise a CDO position who becomes a figurehead for the organisation’s digital evolution.

For a CDO or any technology advocate to be effective, there has to be support from the board and senior management. A technologist can only drive change if they have a mandate from the top.

Even then in some organisations the culture may be so factionalised that the response to change and drive for digital transformation has to come from the existing powerbrokers and a CDO could be at best a hindrance and even obstruct the process.

So the City of Sydney and Jess Scully aren’t wrong in not having a Chief Digital Officer, and neither are Melbourne and Brisbane for having one, it’s a deliberate decision by the various managements to choose the structure and roles that works best for their organisation. Driving change though always remains the responsibility of the board and the CEO they appoint.

Feb 032017
 

Last year the Committee for Economic Development, Australia (CEDA) warned over 40% of the nation’s jobs were at risk from automation over the next 15 years.

While that focus was on the risks to workers, it’s equally threatening for small business. Many companies and sole traders are facing the same disruptions from technological change.

This isn’t a new phenomenon, in the Twentieth century the motor car displaced thousands of small businesses that catered to the horse drawn economy and family run corner stores were displaced by the arrival of supermarkets in the 1950s.

Beyond the personal computer era

At the end of the last century the personal computer’s arrival revolutionised small businesses as suddenly tools that were previously only in the reach of big organisations were suddenly accessible to the most modest venture.

One of the early beneficiaries of that shift to desktop computers in 1990s was the bookkeeping industry which took off as a legion of home based contractors catered for local small businesses.

As the internet and smartphones came along, the bookkeeping market changed as features like bank feeds and receipt apps automated many previously manual tasks.

Despite those challenges the bookkeeping industry has survived and continues to grow with IBIS World estimating the overall accounting industry, which includes bookkeepers, grew 2.6% per year over the past five years.

Close to customers

The success of bookkeepers and accountants in navigating change is probably due to industry being close to their clients along with being early adopters of new technology, two things that caught the taxi industry out when Uber arrived.

Uber’s success in upturning the taxi industry illustrates just how important understanding emerging technologies is for smaller businesses. One industry currently facing massive disruption from robots is the construction sector.

The trades were thought to be relatively immune from automation – after all, who’s going to build a robot plumber? But now robots are moving into trades like bricklaying, as Australian startup Fastbrick Robotics shows.

Fastbrick are building a commercial bricklaying machine, Hadrian X, that automates the trade’s physical work and integrates with 3D printing technology.

In one respect the robot bricklayers are bad for the trade’s employment prospects but for older brickies with bad backs having a machine to help you is a godsend while for employers it improves productivity and reduces workplace accidents. It won’t be the end of the trade but the contractors who survive will have adapted to a very different construction industry.

Restructuring industries

That Fastbrick integrates with design software shows how the dynamics of the construction are changing. In 2014 Chinese company Winsun demonstrated how they can build ten houses in a day with large scale 3D printers.

While we may not see that particular technology in Australia, aspects of it will be used and they are going to change all the trades and professions related to the building industry.

Architects are one building industry group that have long dealt with technological change. Like bookkeepers, the arrival of personal computers completely changed their profession and those who adapted thrived.

Now with cloud computing services plugging into builders’ supply chains like Winsun and machines like Fastbrick’s, architects are closer than ever to the worksite and their customers. The ones who are adapting are the earlier adopters who are getting into these technologies further.

Disrupting the professions

Accountants and architects aren’t the only professions being affected, lawyers are facing a new wave of services using artificial intelligence to do many legal tasks ranging from a chatbot that appeals traffic fines to a program that predicts US Supreme Court decisions.

Like other sectors, it’s the early adopters in the legal sector who are adapting to a very different industry with much of the manual, lower level work being automated out.

The wave of technology we’re now seeing appear – including robots, autonomous vehicles, machine learning and artificial intelligence – are going to change our industries and workplaces dramatically in the next few years.

What the accounting industry and the architecture profession teach us is the businesses closest to their customers and those adopting technology early will be the ones who thrive in a very different industries. Researching, experimenting and paying attention will be the keys to business survival.

An open mindset

Even for the trades, survival during this wave of technological change will be a matter of watching the marketplace closely while being open to new methods and technologies.

Assuming it won’t happen to your industry is probably one of the riskiest things of all. Ten years ago the idea of smartphones revolutionising the taxi business or that robots could replace bricklayers was unthinkable. Now it’s almost expected.

The forces that are changing the workplace are also changing industries and markets, so small businesses will also be affected. It’s going to pay to be smart and curious.

Feb 022017
 
a sydney taxi parks in a city bike lane

Not so long ago, lending for taxi medallions was a safe bet. Now it’s pretty risky, as US lender Capital One revealed in a presentation last week.

Bloomberg reports the lender believes over eighty percent of its taxi loans are at risk of default.

In New York, medallion values have halved while in San Francisco taxi companies are going out of business. As a result Capital One’s loans that looked good a few years ago are now risky.

That problem is global. As I wrote two years ago for The Australian, the Aussie taxi industry has been tipped upside down by Uber and a cast of smaller competitors.

How the taxi companies failed to adapt is interesting. In most cities they were protected by a nest of laws and regulations that were ostensibly to protect passengers and drivers but actually acted to create high barriers that benefited license owners.

In most cities, certainly in New York and Sydney, taxis were dirty and unreliable – drivers were treated poorly and passengers were taken for granted – which made alternatives attractive even before the cheaper UberX and Lyft services arrived.

The protection also made the taxi companies slow to adopt new technologies. There was no reason why Australia’s Cabcharge or San Francisco’s Yellow Cab Company couldn’t have developed a smartphone app to order taxis, track progress and improve business expense reporting – that they didn’t speaks volumes about their inefficiency and complacency.

Being complacent was understandable though as regulators were tame and kept competitors out. Customers had nowhere else to go.

When customers did get the chance, they voted with their wallets and now its the bank accounts of taxi owners and their lenders who are hurting.

That Capital One is feeling the effects of that change is telling – when genuine disruption happens there’s a range of businesses, people and stakeholders affected. We should never underestimate that.

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.