Paul Wallbank – Brilliant Communications

Category: economy

  • Is Small Business Whingeing its way to irrelevance

    Is Small Business Whingeing its way to irrelevance

    “Is small business whingeing its way to irrelevance?” first appeared in Smart Company on August 16, 2012.

    Last week, TripAdvisor announced the results of a worldwide hospitality survey. One of the things that leapt out of the survey was how large hotel chains are using social media while smaller Australian establishments are languishing.

    Following on TripAdvisor’s survey was the release of accounting software company MYOB’s regular index that showed businesses are retreating from the online world with reduced usage rates of social media, eCommerce and online payments.

    At an Australian Israel Chamber of Commerce lunch in Sydney on Tuesday, MYOB’s CEO Tim Reed and Google Australia’s Tim Leeder discussed small business and the web with their Getting Australian Business Online program missing its target of 50,000 sign ups since its launch in March last year.

    The fact more than half of Australian businesses don’t have a website despite free services from Google, WordPress, Weebly and a host of others indicates a deeper apathy among small businesses towards a whole range of issues.

    Earlier this year the New South Wales state government abolished the popular Small Business September program with barely a squeak from the SME sector, with some small business groups actually welcoming what was a dramatic cut to support programs.

    Compare this to the Olympic athletes, not only do we see the AOC coming out swinging with demands for more funding but the yachting team are staging an effective campaign to reinstate NSW government programs to support their sport: The total opposite to the small business community.

    Small business, on the other hand, rolls over and accepts cuts to programs, poorly thought out regulations and government procurement policies that favour multinationals over local companies which are capable of the job.

    When small business is given a chance to have a voice, the community blows it with whingeing. At the NSW Small Business Commissioner’s roadshows earlier this year it was notable how much time was spent whingeing about group buying services, traffic clearways and council permits for coffee tables rather than sensible and achievable wins for the SME sector.

    So it wasn’t a surprise that the result of that roadshow was the cutting of useful programs and little effective change.

    The best example of this whingeing rather than action is the current campaign to increase the GST threshold and abolish penalty rates.

    Instead of focusing on the real problems facing businesses such as high rents, profit gouging from distributors and poorly thought out state and federal regulations imposed by both sides of politics – the small business and retail sectors manage to demonise their staff and customers and increase the suspicions of consumers and workers that they’re being ripped off by big, bad employers.

    In reality, the shopkeepers and other small businesses are struggling to adapt to a rapidly changing economy. They are feeling those changes earlier than the rest of the economy because they don’t have the cushions of fat margins, political connections or guaranteed incomes of the corporate, public or political sectors.

    Those struggles will give the small business sector an advantage over the bigger and slower groups – having adapted to the changed economy, those smaller businesses will be stronger and fitter than their bigger competitors.

    Chris Ridd, of cloud computing accounting service Xero, one of MYOB’s biggest competitors, puts this best.

    “Technology is an enabler and can actually help small businesses gain efficiencies, reach new customers and generate new revenue streams. Why turn your back on the one thing that can turn your business around.”

    It’s the proactive business people adopting new technologies who are going to thrive over the next decade. Whingeing about TripAdvisor, the GST or dumb government policies isn’t going to save an enterprise that’s become irrelevant.

    So make sure your website’s up to date, check what customers are saying about you on social media or review sites and have a look at those cloud computing services that can improve your business’ profitability and efficiency.

    The time to do it is now, before your business becomes irrelevant.

    Similar posts:

  • Economic cholesterol

    Economic cholesterol

    Australia’s productivity isn’t growing and it’s fashionable among business community to blame Australia’s productivity decline on high labour rates.

    While there’s an argument that the cafe worker earning $25 an hour is overpaid – although we don’t hear the same criticism of multimillion dollar packages paid to executives with at best mediocre track records – the argument is far more complex.

    In the McKinsey report linked to above, the mis-investment is put down to the recent resource boom, but is this really true?

    To really understand why Australia hasn’t performed well, we need to look at why the country is so reluctant to invest in assets that will increase our productivity.

    The role of property

    Underlying the recent Australian “economic miracle” is the property industry. The country’s domestic building sector is one of the most efficient job generators in the world. Stimulate the Aussie property market and job growth ripples quickly through the economy.

    This was one the lessons learned in the 1990s recession – successive governments and bureaucrats have learned the mantra “go early, go hard and go residential” when it comes to cutting interest rates and introducing home building incentives like the first home owners grants.

    It was no coincidence that when the Rudd Government was faced by the Global Financial Crisis they launched a wave of initiatives to boost the property industry and shore household wealth. Just as the Howard and Costello governments did in response to the Long Term Capital Bank collapse, Asian economic crisis or the 2001 US recession.

    While those stimulus measures have kept Australia out of recession for two decades, the failure to unwind the measures after the economic shock has passed leaves the nation’s property market remains “hyper stimulated” and over valued. That over investment in property has sucked funds away from other areas which affects the competitiveness of Aussie industry.

    The great property squeeze

    One of the great tragedies of the 1990s was Sydney’s East Circular Quay precinct which could have been one or two of the world’s greatest hotel sites, literally on the steps of the Sydney Opera House.

    Instead, high priced apartments were built on the site and Sydney’s tourism and convention industries are crippled by a shortage of top end hotel rooms.

    Tourism isn’t the only industry affected by the Australia’s obsession with residential property – across the country service stations, sports clubs and convention centres are being demolished to make way for high rise apartment developments. No economic activity seems to trump property speculation when it comes to attracting Australian investors.

    Ideological beliefs

    Adding fuel to the property obsession are the ideologies of the 1980s which are still closely held by the nation’s business and political leaders.

    Capital gains tax concessions introduced by the Howard government in the late 1990s made property and share speculation far more attractive that invention, innovation or entrepreneurship.

    To make matters worse, Australia’s social security policies and taxation laws favour capital gains – any Australian over thirty who has tried to build a business has plenty of mates who did far better out of negatively geared property than those who foolish enough to create new enterprises.

    For those older entrepreneurs facing retirement, they are in for a nasty shock if their businesses don’t sell for what they hope. They would have been far better staying in a safe corporate job and buy a few negatively geared investment properties.

    Again, this ideological belief that capital gains trumps wage or business income means investment is steered away from productive assets and into residential property that can be held for a capital gain.

    The Ticket Clipping Culture

    Australia’s failure to invest in productive assets is not just a feature of the household investor, the corporate sector has a lot to answer for as well.

    While good in theory, the superannuation system has been a failure in providing a capital pool for new and innovative businesses and productive investments.

    The superannuation trustees have largely focused on hugging the index, the ticket clipping funds management culture means that any real investment for productive assets is restricted to funding toll roads where fat management fees and guaranteed commissions mean an easy life for those fund managers.

    In a perverse way, the short term appearance of the ticket clipping might mean increased productivity as costs are cut to improve profits. In the medium and long term, the lack of investment in these assets means in the long term these assets too cease to add productive capacity to the economy.

    Of course there’s more to infrastructure investment than toll roads and airports with crippling parking charges, but the ticket clipping classes of Australia’s investment community don’t see a quick buck in that.

    Increasingly the boards of Australia’s major companies are appointed by those running the superannuation funds and these people have the generational bias away from productive investment. Instead they see slashing IT, training or asset investment as costs to be cut in the quest of boosting bonus delivering profits.

    More fundamentally, three decades of consolidation in most of Australia’s industries has seen a generation of Australian executives whose main expertise is that of maximising their market power at the expense of their competitors. Investing in productive capacity is not a major concern for those corporations.

    Fixing the problem

    Getting Australians – whether mom and dad property speculators or high paid fund managers parking money in the ASX 200 or plonking money in the latest toll road boondoggle – to change attitudes and invest in productive capacity is going to take a generational change.

    As long as the attitude persists that property is a safe investment that doubles in real value every ten years then Australians are going to continue to ply cash into apartments and houses.

    It is possible that a period of Australian Austerity that suppresses property prices may force that change in investment attitudes. An weak property market is one of the unspoken effects of the spending cuts advocated by many right wing commentators,

    The question is whether those commentators, or the political classes who derive their much of their policies from right wing ideologues, view have the stomach for disruption that will come when weaning Australians from the teats of corporate ticket clipping and property speculation.

    Similar posts:

  • Stranded markets

    Stranded markets

    “Stranded assets” are an accounting term for property that’s worth more on the books than it is in the marketplace.

    Often the valuation problem has come about because of market, legislative or physical changes – what was a valuable and useful asset becomes isolated from the rest of a business.

    Customers are biggest asset we have in our business – so what happens if our customer base becomes a “stranded asset”?

    This situation isn’t far-fetched in a time when technology changes a marketplace – a blacksmith providing services to stagecoach companies would have been in this situation a hundred years ago.

    In response to Are Businesses Fleeing the Online Space?, Xero’s Australian CEO Chris Ridd made some points about the problems MYOB have in the accounting software marketplace.

    We see that going online to the cloud is finally allowing many small businesses the opportunity to avoid the “walk into Harvey Norman and fork out hundreds of up-front dollars on on-premise software” experience and instead go straight to the simplicity and cost efficacy of the cloud.

    This is evidenced in our numbers and the fact that 40% of new customers signing up to Xero are coming from no software. (I mentioned last week at the NBN Forum that it was 30%, but we doubled checked and were staggered to find it was actually a lot higher). So we are creating a new market and cloud is therefore increasing the addressable market for accounting software. The cloud changes the economics of doing IT and makes automation of the business accessible and attractive to  a whole new category of SMEs.

    Chris’ point is interesting – the new generation of businesses aren’t going to the computer superstore and buying box software. Which is a problem for those who sell box software such as MYOB and Harvey Norman.

    What’s more, customers have moved away from those same superstores along with things like phone directories and classified ads, which is the problem companies like Sensis and Fairfax have to deal with.

    A decade or so ago, MYOB, Sensis and Fairfax were dominant in their markets with a loyal band of customers. Today the remaining customers – many of whom have not changed their business plans for decades – are”stranded markets” made up of holdouts who won’t move to new technologies.

    Those holdouts aren’t particularly profitable and they are slowly leaving their industries through retirement or, increasingly for these slow adopters, going broke.

    Being dominant in a market that’s declining in both profits and sales is not the place to be for any business.

    It’s difficult for the managers of these enterprises to move as their existing products are their core business, which is the classic innovators dilemma, but the alternative is to end up like Kodak or Sony.

    One thing missed in the eulogies for Steve Jobs is how he overcame the innovator’s dilemma problem within Apple. When it became apparent the old Mac OS was a barrier to innovation, he killed it along with the floppy disk and Apple Device Bus.

    Apple’s customers hated it as most of them had a substantial investment in the hardware which Jobs had made obsolete overnight. But almost all of them came back and became greater fans.

    News Corporation are trying a different tack to Steve Jobs in splitting the operation into an “old” business and a “new’ business. That way the old business can find a way to make money or quietly fade away without affecting the newer, more dynamic entertainment and electronic arms of the organisation.

    The challenge for MYOB – along with Harvey Norman, Fairfax and Sensis – is to move their customers to the new technologies, those who won’t go are the past and those stranded customers will isolate the business from the mainstream.

    Similar posts:

  • Are Aussie Businesses fleeing the online space?

    Are Aussie Businesses fleeing the online space?

    Every quarter accounting company MYOB releases its Business Monitor surveying the SME sector’s confidence and how they are using technology along, usually these show more businesses moving into e-commerce, setting up websites and adopting social media.

    The July 2012 monitor (PDF File) is unusual as it shows a decline in various online business activities, the main areas that slumped were the following;

    • Paying bills on suppliers’ websites: fell from 44% of respondents to 37%
    • Buying products/services online: fell from 37% to 24%
    • Using internet search engines to promote their business: fell from 31% to 24%
    • Conducting email marketing to potential or existing customers: fell from 26% to 24%
    • Accepting online payments from customers: fell from 25% to 19%
    • Using any form of social media for business purposes: fell from 21% to 16%

    All of these are a bit odd, particularly the first three, and it may be an errant group in the 1,000 businesses surveyed.

    Of the others, email marketing’s fall isn’t surprising as businesses have been finding returns in this field falling for sometime with customers unlikely to open messages unless there is a compelling reason.

    Social media isn’t surprising as there’s a feeling of fatigue among business owners confronted with a new hot platform every few months – increasingly it’s getting harder to become enthusiastic about Pinterest or Google+ when existing experiments in Facebook or LinkedIn haven’t really shown results.

    Accepting online payments from customers declining really does indicate a hiccup with the surveyed group, with more online payment services than ever available to small business, it doesn’t make sense that this service is declining.

    MYOB’s CEO Tim Reed puts the decline down to economic uncertainty saying, “We also found more business operators are experiencing revenue falls than are experiencing rises, and the majority lack confidence in a short term economic recovery. I suspect this has seen many shy away from online activities as they focus on the health of their business.”

    If that is the case, then the small business community is in bigger trouble than we thought. Hopefully MYOBs result is just an errant survey result. We’ll be watching to see what the next index shows.

    Similar posts:

  • Good critic, bad artist?

    Good critic, bad artist?

    With the passing of art critic Robert Hughes I’m re-reading a passage of his autobiography, Things I Didn’t Know.

    In Hughes’ passage describing his leaving Australia he talks of attempts at painting and makes an observation about art criticism that is true of every field.

    “You do not have to be a good painter to be a good art critic,” he said. “But there is, to me, something a little suspect about an art critic who has never painted and who cannot claim to grasp even the rudiments of intelligent drawing.”

    The same could be said of any critic – knowing the technicalities, skills, difficulties and effort enables a critic to make informed judgement. That isn’t to say they are superior at their trade than those they criticise.

    It’s been said that we are all two bad decisions from ruining our lives or careers. That’s true in the artistic or professional fields – many managers, entrepreneurs, politicians, artists or just men going through middle aged crises have come unstuck from making the wrong choice at the wrong time.

    It’s why we always have to view the stories of great success with caution, as the winners’ tales are tinged with survivor bias and for every winner there a field of skilled, hard working people who didn’t succeed.

    In some fields, like arts and sport, the winners have to have skills before they will even get a chance of winning. Although there are many who could have be successful but weren’t because they never had an opportunity to pick up a paintbrush, guitar or ball at a key moment in their lives.

    That isn’t quite so true in more subjective fields like business, politics or journalism. In those callings it is possible for a suburban apparatchik, dour accountant or talentless hack to rise because of their mentors, rat cunning or just pure dumb luck.

    One of a critic’s roles is to call out those talentless but lucky hacks and in doing so they do society a great favour.

    In a world where spin and PR often trump good policy or ethical behaviour, we have to pay attention to the informed critics who help us filter out the misinformation and lies that is part of our information diet.

    Similar posts: