Oct 232014
sales methods are changing in an era of cloud computing and social media

Today GE had their At Work conference in Sydney where CEO Jeff Immelt was interviewed by Westfarmers’ boss Richard Goyder.

One of the key messages from Immelt in his interview with the Australian conglomerate’s CEO was that finding growth in a flat global economy is going to take hard work and creativity; just relying on increased domestic spending is not longer an option.

Immelt was particularly pointed about the developed world’s economies, “the US is best since the financial crisis, growth is broad based but it’s still in the two to two-and-a-half percent range. It may be that’s the new normal.”

“Europe and Japan are pretty tough, forty percent of the world’s economy is still difficult, not going downward but stable and flat.”

Preparing for a slow growth world

“We’ve prepared ourselves for a slow growth world but one where you can invest in growth.”

“There’s still opportunities out there,” Immelt observed. “We’re going to have to make our own growth.”

Part of that growth story relates to the end of the consumerist era where debt funded consumer spending, particularly in the US, drove the global economy.

“We are coming out of a time period of the last ten or fifteen years where the US grew four and half percent every year with no inflation. So the US was the dominant economy in the world during the 1980s and 1990s.”

“We knew that was not going to be the same, so we’re in a world with no tail wind where we think greater focus on things like R&D, globalisation and things like that which will be critically important.”

Changing business focus

One of things Immelt did after the global financial crisis was to change the focus of the business away from the consumer finance division that had been a river of gold over the last thirty years back to being an industrial infrastructure company.

“Everyone needs to paranoid about relevancy and what they do great in the world today. There is no shelf life for reputation or anything else.”

“The engine of growth in the US when it was growing at its best was the US consumer, both in the combination of their own wealth and in taking on leverage. That was the engine of growth from 1980 to 2007.”

“It ended badly, but those were big engines of growth. What will be the next engines of growth?” Immelt mused.

Asian consumers to the rescue

Immelt sees the rise of Asian economies as being the next growth drivers with over billion consumers rising in affluence.

Whether those Asian economies can generate the growth that the hyper-developed economies of North America, Europe and Japan were able to provide during the past thirty years remains to be seen given China’s, and most of Asia’s, consumers having nothing like the West’s spending power.

The truth is we’re decades off Asia’s huddled masses having the economic strength to carry the global economy in the way the western world’s consumers did for the closing decades of the Twentieth Century.

For economies like Australia that are largely based upon domestic consumption funded by debt, this will mean a massive redirection of the economy away from renovating houses to investing in productive industries.

Immelt’s message to business leaders is clear; don’t rely on a rising tide of domestic growth to keep you afloat. Companies are going to have to find new markets and products if they want to grow, waiting for customers to arrive is no longer an option.

Oct 182014

Last week the Finnish Prime Minister, Alexander Stubb, raised eyebrows with his suggestion that Apple killed the country’s economy with the iPhone putting Nokia out of business and the iPad reducing global demand for paper.

The real reason for Finland’s immediate problems is a lack of diversity; any country dependent upon one or two businesses or industries is going to be vulnerable should markets move against them.

In the longer term though the problems facing Finland are similar to those across the western world; an aging population, shrinking workforce and tepid export markets.

Finland’s real problems are our problems. How the Nordic nation deals with them will provide some valuable lessons to us all.

Oct 102014

One of the reasons for the success of London’s Silicon Roundabout neighbourhood was the Google Campus that provided a drop in centre and community venue for the growing tech hub.

It turns out the success of London’s Google Campus can be replicated, as shown by the Tel Aviv outpost having similar results.

As a consequence Google are now opening new campuses in Warsaw, São Paulo, Seoul and Madrid.

Whether these cities will have the same success as London and Tel Aviv, both had a thriving tech start up community before their Google Campuses opened, remains to be soon.

One thing is for sure, we’ll see other cities’ governments and tech communities lobbying Google to base a Campus in their tech neighbourhood. It may be worthwhile they have a look at the London one to see what works and how they can set their own local hub.

Oct 092014
Walmart is the one of the world's leading retail businesses

After the announcement earlier this week that HP will split into two, now Bloomberg reports Symantec is considering splitting, this comes after the news that PayPal is being carved off eBay and that Yum foods is looking at divesting some  of its Chinese assets.

It looks like we’re moving into a period where conglomorates are out of fashion; that’s good news for lawyers and consultants advising the companies however it will be worth watching to see what this means for customers, employees and shareholders.

That HP is reportedly shedding 55,000 jobs says some of these conglomerates were chronically overstaffed so it might be good news for the stockholders of the split companies.

Either way, it’s always worth remembering that conglomerates come in and out of fashion in the business world.


Oct 062014
can China save the world?

Three weeks ago Chinese e-commerce giant Alibaba triumphantly listed on the US NASDAQ stock market with a valuation of over two hundred billion dollars. It was a strong announcement to the world that Chinese companies have arrived as global competitors.

A week later telecommunications vendor Hauwei announced it was buying British internet of things darling Neul for £25 million as part of its proposed £1.3 billion investment the UK technology sector.

Quietly last week Another NASDAQ listed Chinese company, computer manufacturer Lenovo completed its purchase of IBM’s mid market server business.

Lenovo’s deal follows its purchase of IBMs PC division in 2005 that saw the iconic Thinkpad laptops become Lenovo products. Both deals tell us much about where the two companies see their respective futures.

China’s great economic pivot

These three big announcements by Chinese companies show how the economy of the Peoples’ Republic of China is pivoting just as other East Asian countries have over the past fifty years.

Leading the example of the East Asian pivot is Japan who pioneered the model of starting as a cheap manufacturing labor source then steadily ground its way up the global value chain to being the leader in many fields.

That model was copied by Taiwan, South Korea, Singapore and Hong Kong. It hasn’t worked everywhere as countries like Thailand, Malaysia and the Philippines have been caught in the ‘middle income trap’ that has seen their economies not move into the higher brackets.

Racing up the development curve

China’s mission with over a billion mouths to feed and keep politically content is to avoid the middle income trap and move into the higher brackets. With an aging population it has to do this far quicker than its successful neighbours.

While Hauwei along with car manufacturer Great Wall and white goods vendor Haier are following that established Japanese model, albeit rapidly accellerated, Lenovo and Alibaba are following radically different paths.

Alibaba has the benefit of catering to a billion strong domestic market that’s leapfrogging the west in technology adoption. This gives the company a firm foundation for its global operations.

With Lenovo, the sweeping up of the US technology sector’s crumbs is a strategy that sees them buy immediate market share and develop a global position that would take it another generation to do so under the Japanese model of organic expansion which companies like Honda, Toyota and Sony pioneered.

The task ahead for the Chinese economy in moving up the economic value chain is immense and not without huge political, business and social risks. However as the economy ages, it’s a journey the country’s business and political leaders have to make.

Recently China watcher Patrick Chovanec spoke on the Chinese pivot and warned that the changes will have major ramifications for the world economy, particularly for the commodity exporters — notably  Brazil, Australia and China — who provided the raw material for the country’s early economic expansion.

Lenovo, Alibaba and Hauwei are leading the change in the Chinese economy and how their strategies work will define business in the mid 21st Century.

Oct 032014
Fibre broadband rollout

Google Fiber’s stated aim is to improve access to high broadband internet connections for the communities it’s being rolled out in.

The Wall Street Journal reports that this isn’t going so well with take ups of the fiber service in the poor parts of Kansas City being a quarter of those in middle class areas.

It’s not surprising an expensive service like fiber internet isn’t taken up by folk who don’t have money, but the discrepancy between the haves and the have nots should be a concern as access to today’s communication tools is key to economic progress.

During the rollouts of the railways, telegraph and motor car it was giving working people access to the new technologies that drove growth. If internet access becomes only available to the few then today’s technological developments deliver on their promise.

Sep 202014

Chinese e-commerce company Alibaba floated on the New York Stock Exchange and immediately rang up a 38% gain that values the company at $238 billion, behind only Microsoft, Apple and Google in tech stock valuations.

One of the major shareholders in Alibaba is Yahoo! who posted a 2.7% drop in value despite picking up a $5 billion windfall from the Chinese companies float.

For Alibaba’s founder Jack Ma, this float and the stock market’s reaction is a vindication of his business and of China’s place in the modern global economy, something we discussed with early Alibaba employee Porter Erisman last year.

Alibaba also shows that Chinese companies are now credible international businesses and companies like Haier, Lenovo and Hauwei need to be taken seriously as competitors and suppliers.

While Jack Ma and Alibaba celebrate, Marissa Mayer and Yahoo!’s management team are going to have to give some careful thought about how to use that extra five billion dollars. Time and investor patience is dwindling away for the once powerful internet giant.

It may be too soon to draw Alibaba’s success and the fall of Yahoo! as being the parallel of the rise of the Chinese economy and the decline of the US, but yesterday does give a strong signal about how the global economy is changing.

Image source: alibabagroup.com