Paul Wallbank – Brilliant Communications

Category: future

  • The pay day

    The pay day

    Last Sunday Mark Fletcher celebrated his 10,000th post at the Australian Newsagency Blog. In seven years of posting that’s an impressive achievement for someone running both a retail store and a software company.

    In his landmark post, Mark looked at the major issues he’s covered on his blog over the last few year and one stands out as the biggest – the payoff for newsagency owners when they sell their businesses.

    The failure of many newsagents to manage their businesses for day to day profit. Too many newsagents expect their pay day when they sell and do not realise that their pay day is today, tomorrow and next week … and that this determines what they will receive when they sell.

    For Australian newsagencies the news is bad; their established industry is struggling in the face of technological change and regulatory changes – both of which are other points Mark raises – but more importantly the buying and selling businesses in all sectors is undergoing a fundamental economic shift.

    Lifestyle Businesses

    The underlying idea is that these businesses are what Steve Blank calls “lifestyle businesses”; proprietors buy them to provide an income for their families.

    For these “lifestyle businesses” to have a resale value another family is has to raise the funds to purchase the enterprise.

    Therein lies the problem, most purchases of businesses are financed by bank loans secured against property.

    Late baby boomers and Generation Xers – those born between 1955 and 1970 – are the obvious buyers of these businesses and they don’t have access to the same equity as their parents.

    The situation is even worse for those generations following whose high education debts mean an even later entry into the property market and even less equity available should they want to buy these businesses.

    For sellers, this means is buyers can’t pay the prices retiring business owners need as their nest egg to support them through twenty or thirty years of bowling or travelling in their later years.

    This inter generational mismatch isn’t just restricted to Australian newsagents; it’s a problem around the Western world for business owners whose exit strategy involves selling the business as a going concern for a substantial amount.

    Cash poor buyers

    As we reach the end of the late 20th Century credit boom, the money isn’t there for people to pay the sort of sums required by existing local business owners to retire in comfort. Even if the banks were prepared to lend the sum required, the buyer’s underlying assets can’t secure the loans and, most importantly, the cashflows aren’t there.

    In an Australian newsagent context much of the cashflow has changed because of deregulation and new competition but on the bigger scale changing consumption patterns at the end of the 20th Century debt binge coupled with aging populations and restricted credit are changing the economics of family owned, small local businesses.

    For the current owners of these small businesses, it means the pay day has to be today as it won’t be there tomorrow.

    The danger is how many will follow the example of the large corporations who find themselves in a similar situation and respond by excessively cutting costs or chronically under-investing which is what has crippled big store retailing across the US, Australia and the UK.

    Mark’s constantly pointed out that Australian newsagents have to reinvent themselves, as he celebrates seven years of blogging and 10,000th blog post it’s probably worthwhile considering how many, like the rest of us, will be working in our businesses far longer than we originally expected.

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  • Why governments fail in building Silicon Valleys

    Why governments fail in building Silicon Valleys

    Don’t Give the Arnon Kohavis Your Money warns Sarah Lacy in her cautionary tale of what happens when an economic messiah comes to town promising to create the next Silicon Valley.

    “Hopefully this story finds a way to circulate out to the wider audience of government officials and old money elites who have good intentions of wanting to make their city a beacon for entrepreneurship.” Writes Sarah. “Hopefully it reaches them before they get bamboozled into giving the wrong people money to make it happen.”

    Bamboozled Bureaucrats

    For 19 months I was one of those government officials and saw those good intentions up close while developing what became the Digital Sydney project, that bamboozlement is real and a lot of money does go to the wrong people.

    Sarah’s points are well made, Silicon Valley wasn’t built quickly with its roots based in the 1930s electronic industry and the 1960s developments in semiconductors – all underpinned by massive US defence spending from World War II onwards.

    In many ways Silicon Valley was a happy and prosperous accident where various economic, political and technological forces came together without any planning. Neither the Californian or US Governments decreed they would make the region an entrepreneurial hotbed and sent out legions of public servants armed with subsidies and incentives to build a global business centre.

    This is the mistake governments – and a lot of entrepreneurs or business leaders – make when they talk about “building the next Silicon Valley”; they assume that tax free zones, incentive schemes and subsidies are going to attract the investors and inventors necessary to build the next entrepreneurial hotspot.

    For governments, the results are discouraging; usually ending in failed incubators and accelerator programs all conceived by public servants who, with the best will in the world, don’t have the skills, incentives or decades long timelines to make these schemes work.

    New England’s failure

    At worst, we end up with the corporate welfare model that sees governments and communities exploited like the tragic story of New London, Connecticut, where the local government spent $160 million and cleared an entire suburb for drug company Pfizer to establish their research headquarters, which they closed a few years later and left a waste dump behind.

    While the New London story is one of the worst examples, this sort of corporate welfare is the standard role for most government economic agencies. The department I worked for gave subsidies to supermarket chains to open distribution centres and stores that they were going to build anyway.

    One of the notable things with development agencies and the provincial politicians who oversee them is how they are easy victims for the economic messiah – it could be a pharmaceutical giant like in New London, a property developer promising Sydney will become a financial hub or a US venture capital guru flying in and promising Santiago will be the next San Francisco.

    The truth is there are no short cuts; building a technology centre like Silicon Valley, a financial hub like London or a manufacturing cluster like Italy’s Leather Triangle take decades, some luck and little intervention by government agencies or outside messiahs.

    Silicon Valley and most other successful industry centres are the result of a happy intersection of economics and history. The best governments can do is create the stable financial, tax and legal frameworks that let inventors, innovators and entrepreneurs build new industries.

    All government support isn’t bad as well thought out, long term programs that help new businesses and technologies grow being the very effective – we should keep in mind though taht Silicon Valley couldn’t have happened without massive US military and space program spending.

    Like a parent with a baby, the best governments can do is create the right environment and hope for the best. Interfering rarely works well.

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  • Pretty shells and shiny toys

    Pretty shells and shiny toys

    “I was like a boy playing on the sea-shore, and diverting myself now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of truth lay all undiscovered before me.” – Isaac Newton

    “We live in a bubble, and I don’t mean a tech bubble or a valuation bubble. I mean a bubble as in our own little world,” – Eric Shmidt

    Newton’s famous quote is one of the things that jumps out on reading the opening of Jeff Jarvis’ Private Parts, is how we live in an era of pretty shells that catch our attention and obsess some of us.

    While we play with those pretty shells, we ignore much of what is happening around us. Those glittering social media and cloud computing tools are fun to play with, but what do they really mean?

    The winners from the early stages of the industrial revolution were people like Josian Wedgwood and Robert Stephenson who saw how to apply the inventions of the time to create new products and markets, later they were followed by people like Thomas Edison, Andrew Carnegie and Henry Ford who developed the industries of the 20th Century.

    Right now, we’re making shiny trinkets out of our technology tools, Business Week’s It’s Always Sunny in Silicon Valley makes this case well and Eric Schmidt’s bubble quotation above comes from that.

    We see lots of applications for finding coffee roasters, sharing music files and plugging into the social media platform of the day; all of which are the concerns of middle class white people trying to maintain last century’s consumer society.

    Somehow we’re missing the bigger picture, but gee those sea shells are pretty.

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  • All hail the vacuum tube

    All hail the vacuum tube

    In 1931, the New York Times celebrated its 80th anniversary and invited some of the era’s greatest minds to speculate on what the world would like in the next 80 years.

    80 years on, Business Insider looked at those predictions and few interesting things stood out that show us how, even when we are right, things don’t turn out the way we expect.

    Sir Arthur Keith – a doctor, scientist and prodigious writer who was one of the pioneers in popularising science – correctly forecast that medicine would become increasing specialised, predicting “I tremble when I think what its (The New York Times’) readers will find on their doorsteps every Sunday morning.”

    Those very advances have contributed to the slimming down of the New York Times and the that many readers don’t collect it from their doorstep each morning, threatening the very future of the organisation.

    William Ogburn was the prominent sociologist of the day, and predicted “Humanity’s most versatile servant will be the electron tube” and that “labor displacement will proceed even to automatic factories.” All of which was true.

    The “electron tube” – or vacuum tube – is an interesting allusion to the prevailing technology of the day. Vacuum tubes were changing the world with the first wave of electronics and digitalisation.

    Morse Code’s system of dots and dashes could be replaced with Zeros and Ones that allowed the technologies to be applied to radio sets, machinery and telephones.

    The real benefits of these technologies had to wait until the vacuum tube was replaced with the transistor in the 1970s. Transistors were even more portable and as integrated circuit and manufacturing processes evolve, we saw “Moore’s Law” develop where computer power doubles every eighteen months.

    Both William Obburn and Sir Arthur Keith were proved right, but not quite in the way anyone could have foreseen at the time.

    Which shows how fraught predictions are; even if we are correct how things turn out might not be quite what we expect. It’s worthwhile considering this when we look at how trends and innovations may affect our businesses.

    The Business Insider article on the original predictions is worth reading, along with its sister article on how the world will look in 2050.

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  • The death of local newspapers and media

    The death of local newspapers and media

    The bankruptcy of Lee Enterprises, publisher of 48 newspapers across the United States, is the  latest episode in the steady decline of local  printed media. Is the newspaper, particularly the local publication catering for a smaller market, dead?

    Futurist Ross Dawson certainly thinks so, last year predicting US newspapers won’t exist as we know them by 2017 with them being replaced by digital platforms like the web, iPad and Kindle.

    The problem for the media industry is how to fund news gathering in a digital environment. Newspapers are dying because advertisers have moved online, so Google now makes $30 billion a quarter on the income the local paper has lost in classifieds and display advertising.

    For web surfers, this is also a problem as much of what appears on the net — in blogs, Facebook, on Twitter and circulated around message boards — comes from newspapers and largely subsidized by their rapidly eroding print revenues. Take out the traditional media, and many of the authoritative online sources disappear.

    Much of the free web content we’re seeing is a transition effect as we evolve to paid online models, something that is going to be driven by advertisers following consumers’ eyeballs to the net.

    For the publishers who don’t go broke in the meantime, this will probably save them in whatever form they evolve into.

    Cutting costs to survive the current lean period is essential for newspapers, the tragedy is many are following other industries in cutting the very areas that give them their competitive advantage while keeping antiquated and expensive management who hang on to failed strategies.

    Poor management is probably a bigger threat to the news empires, as it is for many other industries.

    The damage done by poor business leadership is far greater than the cost of outsized management salary packages and entitlements. Until shareholders address the number, cost and suitability of the managers charged with running their investments, the future for these organisations is bleak .

    Local journalism is going to change as we start seeing old media’s economies of scale being replaced by cheaper technology that allows local people to reclaim their news and community stories.

    They will be doing this through blogs and social media while using their mobile phones and cheap cameras to capture and document local news.

    For the local newspapers and media outlets who understand and harness their community, they’ll remain valued local commercial citizens; for those who see their readers as a mass of dumb consumers, they’ll be lucky to last the decade.

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