Dec 132016
 
Does the digital divide really exist

Earlier this year, Telstra released the Digital Inclusion Index along with its report on measuring Australia’s digital divide.

Last week in Sydney the company hosted a half day conference to look at the ramifications of the 2016 report.

Overall the report was good news with most indicators showing improvements although the gap between the connected and the most disadvantaged has widened since the first index was compiled in 2014.

In general, wealthier, younger, more educated, and urban Australians enjoy much greater inclusion. All over the country, digital inclusion rates are clearly influenced by differences in income, educational attainment, and the geography of socioeconomic disadvantage. And over time, some Australian communities are falling further behind.

The one factor the survey found that is declining nationally is affordability which the authors put down to Australians’ increasing reliance on the internet.

The Affordability measure is the only dimension to have registered a decline since 2014, but this outcome does not simply reflect rising costs. In fact, internet services are becoming comparatively less expensive – but at the same time, Australians are spending more on them.

Sadly affordability isn’t going to improve should the government’s proposed broadband levy of seven dollars a month become reality to subsidise rural users.

That such a levy would be proposed by a government that was opposed to a National Broadband Network and to ‘Big New Taxes’ while in opposition is an irony left for Australian political historians to discuss but it shows how comprehensively the NBN project has failed.

Even sadder is the NBN  isn’t delivering for businesses as it increasingly becomes apparent the network being built will struggle to deliver 21st Century services to most of the nation.

That businesses are struggling to connect emphasises just how serious the digital divide is becoming for the economy – as supply chains in every industry become increasingly globalised regions that aren’t connected risk being isolated from their markets.

Policy makers have to consider the costs of those communities and groups being isolated from the modern economy. If we are going to be serious about building a twenty-first century society then we have to consider how disadvantaged groups and regions access global networks as well as making sure they have the skills to benefit from these technologies.

Mapping the areas of the disadvantage is a good first step but we have to look at how we address the segments of our society that are being left behind.

Oct 062016
 
sales methods are changing in an era of cloud computing and social media

In most developed countries the small business community is shrinking. What can governments and communities do to grow what should be the most vibrant sectors of their economies?

What happens when a whole industry shuts down overnight? Australia is about to find when its motor industry effectively comes to an end this week.

The fallout for the workers is expected to be dramatic with researchers reporting the soon to be laid off staff being totally unprepared for their predicament.

So worrying is the predicament of those auto workers that Sydney tech incubator Pollenizer is offering small business workshops for laid off workers.

Those workshops will be needed. One of the striking things about the research is just how few of the workers are interested in launching their own ventures despite their poor employment prospects in other industries.

australian_ford_workers_employment_intentions

While the auto workers are a group with relatively low levels of education and work experience, their reluctance to starting a business is shared by most Australians with the nation’s Productivity Commission 2015 enquiry on business innovation reporting the number of new enterprises is steadily falling.

australian-business-exits-and-entries

Despite Australia’s population increasing twenty percent since 2004, the number of new business is falling. The country is becoming a nation of risk averse employees, something not unsurprising given the nation’s crippling high property prices which puts entrepreneurs at a disadvantage.

Australia’s reluctance to set up new ventures isn’t unique, it’s a worldwide trend with most countries not having recovered since the great financial crisis.

The tragic thing with this small business drought is that it’s never been cheaper or easier to set up a venture as  Tech UK and payment service Stripe show in their list the software tools being used by ventures.

Accessibility of tools or even government taxes and regulation isn’t the barrier in Australia. As the World Bank reports, the country is the eleventh easiest place in the world to start a new venture.

In United States experience shows there’s a range of other factors at work dissuading prospective small business founders – interestingly the United States comes in at a mediocre 47th as a place to start a venture in the World Bank rankings.

A healthy and vibrant small business sector is important to drive growth and diversity in the broader economy. The challenge for governments and communities around the world is to find a way that will spark the small business communities, in a world awash with cheap capital that shouldn’t be impossible but we may have to think differently to the ways we are today.

Oct 012016
 

Last year the Sydney startup and business communities were stunned by the SydStart startup conference announcing it was rebranding itself as StartCon and moving to Melbourne after the Victorian government had offered to fund the event.

At the time StartCon’s Matt Barrie and the Victorian government were most certainly in love with Barrie describing how Melbourne was well placed to be Australia’s startup centre and highlighting the lack of support from the City of Sydney and the New South Wales state government.

Sydney’s shame

In Sydney, the announcement caused a great deal of hand wringing as the city startup and tech communities worried that government neglect would see the more proactive Victorian government attract businesses and talent.

Now the friendship with Melbourne is over with Barrie publishing a scathing blogpost on the inertia and duplicity of the Victorian state government.

The tale of StartCon and its falling out of love with Victoria holds a number of lessons for businesses being tempted by the siren call of government incentives and the risks to taxpayers.

What can I announce today?

The announceable culture is endemic in Australian politics. Having announceables is absolutely critical part a ministers’ life and their careers can defined just as much by not having enough good news to announce as being victims of bad press.

In the last NSW Labor government, ministers had hard KPIs they were held to in cabinet which gave rise to Chatswood-Parramatta railway line probably being the most announced infrastructure project in history.

While the current Victorian government may not have those formal measures, Small Business Minister Phillip Daladakis is a very good player of the announceable game. He’s a man with a future in state politics.

The mistake of the StartCon organisers was to agree to public announcement before they had secured the money.

Public service thinking

I’d never heard of Dr Pradeep Phillip prior to his appointment to run LaunchVic but his previous position as secretary of Victoria’s Department of Health and Human Services doesn’t seem to immediately qualify him to run the state’s startup development agency.

His conduct, and that of his staff, in the published correspondence chain are those of classic risk averse public servants. Not a bad thing when you’re dealing hospital procurement practices but when you’re dealing with startups and new businesses it would be nice to have someone with more relevant private sector experience.

A notable part of the Victorian public service’s risk aversion is the language of the convoluted grant agreement where the state government may provide support. This, along with the classic attempt of shifting all responsibility away from the agencies, opens a lot of wriggle room for the government to get out of paying the publicly stated amounts.

Equally the use of registered mail after weeks of ignoring emails smacks of institutional backside covering. This underscores the disconnect between public servants and the business world, particularly with smaller organisations, events and startups.

The futility of government support

For StartCon’s organisers their embarrassing and terrible Melbourne experience underscores the futility of depending upon government incentives to site your business or event.

In choosing where to base a business important factors are the access to markets, labour and capital with affordable office space being another key issue. For event organisers, the access to reasonably priced venues and accomodation for the attendees – two factors where Melbourne has a real advantage over Sydney – are equally critical.

Government incentives are almost irrelevant to those consideration and really only become the deciding factor if the competing locations are equal in the other respects.

Counting the real cost

The real damage though is to StartCon’s credibility – having made the public decision to move to Melbourne with much fanfare the climb down is a humiliation – but, more importantly the event is compromised in the eyes of its Sydney supporters. The chase for government money also draws a scent of hypocrisy among a group known for its Libertarian leanings.

Equally however the Victorian taxpayers should be concerned at how their government is announcing support for businesses and events without real substance. One suspects that a fair proportion of Mr Dalidakis’ announceables have similar backstories.

More importantly Victorian taxpayers should be questioning the nature of support – with the SydStart announcement there was widespread irritation in the Melbourne tech community that a Sydney based event should get such government backing and similarly funding foreign multinationals to setup Australian sales offices in the southern state’s capital is going to do much to build the state’s tech sector.

Australian sovereign risk

Something all Australian taxpayers and businesses should be concerned about is the unreliability of governments of both complexions at state and Federal level. Too frequently promises are broken leaving companies and communities out of pocket.

The shutting down of the COMET scheme under the new Federal Labor government in 2007 and then the incoming Liberal government replacing the ALPs Commercialisation Australia program in 2013 are good examples of sovereign risk where entrepreneurs spent thousands of dollars and hours only to have the grants pulled without notice.

Innovation schemes are only one example, almost every program is at risk when a new minister, let alone government, is appointed. It would be a foolish manager or business owner who would base their financial forecasts on any Australian government policy.

As we saw in the City of Sydney elections, the real key to developing industry is to have an attractive, well serviced location with access to capital, skills and markets. Melbourne may well do that better than Sydney but it won’t be achieved by ministers bearing gifts.

Sep 292016
 
A small business closing due to rent increase

One of the notable things about the 2008 financial crisis was how people stopped setting up businesses. Faced with economic uncertainty, it seemed most folk decided starting new ventures was just too risky.

The OECD’s Entrepreneurship at a Glance report shows just how dramatic that fall in small business creation since the financial crisis has been with United States’ current new business formation rates at 15% below 2008 levels, Italy’s at 35% and Germany’s at 23%.

Even in Australia, which largely escaped the 2008 crisis, business formations are twenty percent lower. This is despite interest rates being close to zero for the last five years.

Those statistics are telling – despite the talk about tech startups, people are not starting new ventures at the rates they were ten years ago. That’s a worrying aspect for economies and future growth prospects.

Sep 012016
 

For the last two days Chinese network equipment vendor Huawei has been holding its first Huawei connect conference in Shanghai.

There’s alway plenty to announce at these conferences and Huawei had consultancy partnerships with both Accenture and Infosys, their IoT strategy and their big push into cloud computing.

Ken Hu, the company’s current CEO, even had a new word – cloudification – to describe how business processes are going onto the cloud. Although during the segment on their relationship with SAP, the Huawei executives were at pains to emphasise that in their view most enterprises are a long way from going to a public cloud and will be hosting their own services for some time yet.

Despite the clumsy buzzwords, Huawei does have an interesting selling point in the market with its tie up with telcos giving it both a strong sales channel and a unique selling point. How well they execute with telecommunications companies that are notoriously poor at selling these services remains to be seen.

Huawei’s internet of things services are a similar proposition. Being close to the carriers means the company is well positioned to compete in the market, particularly in M2M applications, but again that closeness to telcos could be a hindrance.

The big message from Huawei Connect is that Chinese companies are genuine competitors to European and North American companies like Ericsson and Cisco, something illustrated on Tuesday when Tencent previewed their new head office in Shenzhen that will act as a live R&D lab for their IoT offerings.

Overall Huawei Connect was a good example of the Chinese government’s efforts to shift the nation’s economy up the value chain.

Aug 302016
 
we need to treat chinese markets carefully

At the recend Autodesk University event in Sydney I had the opportunity to talk with Pat Williams, the company’s senior vice president for Asia Pacific.

Williams’ beat covers all of Asia and he’s based out of Shanghai where he’s been based for the last eight years and prior to that he spent a decade in Japan.

Having spent so much time in North East Asia, and heading to the PRC the following week myself, it was interesting to hear Williams’ views on how industry is changing in China and ther country’s attitude to American software companies.

“There’s a lot of noise that gets made in China about their local IP and the local vendors and what I say is ‘the Chinese companies are competing in a global market and they are under the same competitive pressures as everybody else in the world so when they find a better tool they use it. Despite all the noise, business is quite good there.”

For the Chinese economy, the aging and increasingly expensive workforce presents a problem, something addressed by the China Manufacturing 2025 plan which sees the country increasingly competing in high tech sectors such as aerospace, telecommunications and biotech fields.

“China’s kind of an anomaly,” says Williams of the country’s immense growth rates. “From a government perspective there’s a lot of horsepower behind the things that they do – China 2025, their manufacturing initiative, you’ve got what they’ve been doing with Building Information Modelling (BIM) and our architectural tools.”

They’ve really kind of spearheaded what we’ve been talking about on things like 3D printing of houses. China on its own is just this mushroom that’s happening.”

While the industrial shift in China and the rest of Asia is promising opportunities to companies like Autodesk, that change is affecting their workforce as well with the company announcing plans to lay off ten percent of their workforce earlier this year.

Those cutbacks are part of the adjustment to a new market reality says Williams, “it was part of right sizing the business.” He observed “we realised our margins were going to be compressed as we move to a subscription model.”

Autodesk’s shifts illustrate how the opportunities in the new economy don’t come without costs even for the companies that seem to be winners in a shifting marketplace.

In China, American companies are finding they have to a unique proposition – companies like Apple and Autodesk are good examples – and as the country moves its economy further up the value chain all foreign businesses are going to have to show how they add value.

Succeeding in a changing economy isn’t without uncertainty. And it certainly isn’t without risks.

Aug 222016
 
building sydney as a smart city

There’s a mayoral election pending in Sydney and the talk of the city becoming a startup hub is becoming one of the issues.

Over the next few days I’m hoping to interview each of the four major candidates on their policies regarding how they see Sydney competing against the likes of Singapore and Shanghai, let alone San Francisco or London.

In 2009, I was working with the New South Wales state government on their Digital Sydney project which looked at how the state capital could become a global centre, one of the things we found was that the city had many of the attributes successful creative centres had – diversity, tolerance and access to talent.

That project died in the face of bureaucratic ineptitude but the idea still kicks around with last week’s launch of the NSW Government’s Jobs For The Future report which, despite its opening thirty pages of buzzwords and waffle, contains some serious analysis of the state’s reliance on inward facing service industry jobs.

Refreshingly, the NSW Government strategy looks beyond the current mania around tech startups based on the Silicon Valley venture capital model – something the Federal government’s Innovation Statement failed to do – and discusses how to encourage growth and investment in other emergent sectors both inside and outside the inner city startup communities.

While Sydney can be an attractive place to live for the digital elite, it falls down in a number of areas with property being among the most expensive in the world, telecommunications being costly and unreliable coupled with a complacent corporate sector and a stingy investment community.

Making the city more attractive is going to take a number of initiatives that including easing the cost of doing business, improving links between academia and industry along with tapping into Sydney’s diverse immigrant populations.

Some of these factors are within the City of Sydney’s purview but most of them are state or Federal matters. By definition this limits what local politicians can do.

Which doesn’t mean they shouldn’t try to do them and it’s good to see these topics have become issues in the local elections. For Sydney though, one suspects it’s going to business as usual until The Lucky Country’s luck runs out.