Paul Wallbank – Brilliant Communications

Category: Investment

  • Is Australia missing the Indonesian opportunity?

    Is Australia missing the Indonesian opportunity?

    Mary Meeker’s annual State of the Internet Report looks at the trends driving the online economy. One area that should be of concern is that Australian entrepreneurs are overlooking one of the world’s biggest growth markets that is sitting right on the nation’s doorstep.

    Early in Mary’s overview, on slides 5 and 7, she shows the growth of various markets. Indonesia is the second biggest growth market for internet users – 58% year on year to 55 million – and eighth in the world for smartphone growth with a 36% increase last year taking total users to 27 million.

    Given the penetration of both smartphones and the internet are low with only one quarter of Indonesians connected to the internet and less than one mobile phone in ten currently being a smartphone, there is massive potential for the savvy entrepreneur.

    While there’s a steady stream of stream of Australian app developers and entrepreneurs heading to Silicon Valley, London and a few to Singapore there’s very few looking to their biggest neighbour.

    This ignoring of Indonesia is one of the many omissions in the Australia in the Asian Century report; despite being one of Australia’s closest neighbours with the world’s fourth largest population and an economy growing at over 6% per year, both businesses and governments tend to overlook the nation.

    For Australia, the tragedy is that Indonesia has a lot offer businesses that do more than just dig up coal and iron ore.

    Perhaps now the mining boom is over, entrepreneurs and governments might start to take markets like Indonesia, and other South East Asian countries more seriously. It’s an omission that’s currently costing the country dearly.

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  • Disrupting the disrupters

    Disrupting the disrupters

    Two days ago, iconic venture capital investor Fred Wilson, wrote about the changing nature of the tech industry’s VC investments.

    Fred puts the changes down to three factors; maturing markets where big players increasingly dominate, the move to mobile which Cristina Cordova examines in more detail and the shift in focus from the consumer market to the enterprise sector.

    The last factor bears more examination as consumer and enterprise are very different and there’s no guarantee that businesses built around thousands of people downloading apps or accessing websites can pivot into selling into corporations and government agencies.

    Probably the biggest problem is the consumer or small business freemium model doesn’t cut it in the enterprises who are prepared to pay big sums for highly reliable and secure services.

    Similarly the enterprise model of fat sales commissions paid for by big implementation costs and expensive support contracts doesn’t quite fly either for these start up business. There’s also a good argument that high margin enterprise model is doomed anyway as cloud services displace costly in-house installations.

    In the transition from consumer to enterprise is difficult and most companies have struggled to make the jump, even Google Docs has been a hard sell into the corporate sector.

    At the enterprise end, cloud services are cutting margins as IBM and Oracle are finding. Both companies are moving across to cloud products and now a lot of salespeople and consultants in those organisations are looking at a substantial drop in their standards of living.

    More importantly for the startup and VC communities, the “greater fool” model doesn’t work in the enterprise space. Hyping a business which has barely made a cent in revenue but does have a million users is very different to building a stable corporate platform.

    It may well be the move to the enterprise by Silicon Valley is because the consumer model has run out of “greater fools” who’ll buy overhyped photo sharing apps or social media platforms of dubious value.

    This change in investment behaviour also has lessons for governments trying to copy Silicon Valley. The puck moves fast in the investment community while governments, by definition, are slow.

    By the time governments have setup their programs, the markets have moved on and many of the hot technologies of two years prior are now old hat. This is exactly what we’re seeing in the apps world.

    We often hear about technology causing disruption, often though we forget that those disruptive technologies can be ephemeral as they are disrupted themselves.

    As these industries evolve, we’ll see how well the disrupters deal with being disrupted.

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  • Digital maturity and the profitable business

    Digital maturity and the profitable business

    “The advantages of Digital Maturity”‘ a paper recently released by researchers at the MIT Sloan school of management looked at how different businesses adopted technology and the effect this had on the companies’ profits.

    The authors of the paper, George Westerman, Didier Bonnet and Andrew McAfee, defined ‘digital maturity as a combination of a company’s level of technology investment and the management skills to implement that technology. From this they classify businesses into four categories – the beginners, conservatives, fashionistas and digirati.

    Wallowing in the bottom right are the beginners, who have little idea of how to use technology and as a consequence don’t apply tech to their business. While they’ll use computers and will almost certainly use tools like ERPs and accounting software, they won’t implement them beyond their immediate needs.

    This could describe thousands of big and small businesses who have learned just enough to do what they need but don’t really understand, or care, about what their IT systems can do for the way they work.

    Above the beginners sit the fashionistas, the businesses who like shiny tech things but don’t really have a strategic understanding of technology or how to apply it effectively. As a consequence the digital tools are underused and fashionistas don’t use them much more effectively than the beginners.

    More effective users of technology are the conservatives and digerati, the latter are like the fashionistas except their managements understand how to integrate technology into their business.

    The conservatives are probably the most typical business, slow to adopt new technology but when they do, the management ensures it is used effectively.

    Of the four groups, MIT’s researchers found that the digerati and conservative categories earned between 9 and 26% more profit than their peers.

    The use of technology makes a difference as well with the fashionistas getting a 16% better return on assets than the conservatives which is something worth noting about the adoption of tech in a business.

    What the researchers concluded was that businesses who aren’t adopting technology are falling further behind in skills as well as profit noting that attaining ‘digital maturity’ takes several years.

    It’s worthwhile reflecting on how digitally mature your business is and reviewing exactly how you’re using technology in your organisation. With the tools available for today’s business, there’s no reason to be playing with the beginners.

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  • Reinventing the connected bank

    Reinventing the connected bank

    Yesterday the National Australia Bank had a media briefing to show how they, like their competitors, are revamping their entire business around new technologies.

    The investments are substantial and the re-organisation of the business is too as the old model of branch based banking only available from 9am to 4.30pm is superseded by the always on model of Internet banking delivered through tablets and smartphones.

    One of the notable points the NAB executives made was their move to authenticating customers through voice recognition. A trial had found the system reduced fraud and social engineering attempts dramatically.

    The use of voice recognition makes sense as it reduces the reliance on users remembering passwords or having to give over personal information that can often be gleaned off social media sites.

    Again we’re seeing data security evolving away from passwords.

    On the social media front, NAB are also offering their small business customers Facebook selling tools in collaboration with social media sales platform Tiger Pistol.

    While it’s questionable that businesses will get that much from a Facebook store, it’s a good attempt from the bank to add some value and encourage their commercial customers to move online.

    The move online is essential as the bank noted that online sales through their merchant platforms are up 23% as opposed to an anaemic 2.5% in general sales.

    Along with passwords dying, the NAB also found that the cash register is dying and being replaced with smartphone and tablet apps. The bank itself is moving its online platforms to being ‘device agnostic’ so as not to be locked into any one technology.

    What the NAB, and its competitor the Commonwealth Bank, are showing is the importance of having modern systems which are flexible enough to evolve with changes in the marketplace.

    Smaller businesses could learn from the banks on just how important this investment is. The organisations who aren’t making these changes are steadily being left behind.

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  • Silicon lemmings

    Silicon lemmings

    Despite their self proclaimed belief in thinking different, many of today’s internet entrepreneurs tend to travel in flocks and follow the whichever business model is currently being hyped by Silicon Valley’s insiders.

    From the original dot com boom in the late 1990s to today, web entrepreneurs and their investors jump onto the bandwagon of the day – it could be online shopping, photography applications, group buying services and taxi apps which are the flavour of the moment.

    The latest taxi app is Click-a-Taxi, a European venture which has raised a stingy $1.5 million in second-round funding, which joins a legion of taxi and hire car apps following in the wake of market leader Uber.

    Unfortunately for the investors in these taxi and hire car apps, these services are making some pretty powerful enemies.

    Around the world gatekeepers such as taxi companies and booking services do their best to keep drivers in poverty while over charging passengers for a poor service.

    The new apps disrupt that business model by offering a better service for customers and a better deal for drivers – most importantly it deprives the gatekeepers of their cut.

    Predictably, the backlash is fierce with 15 US and Canadian cities proposing to tighten the rules on the use of GPS and smartphone apps.

    These backlashes are going to prove expensive to the investors as Silicon Valley entrepreneurs have a habit of under-estimating the power of regulatory barriers. How the current crop of taxi apps deal with this will determine which lemmings go over the cliff* and which ones survive.

    One group of Silicon Valley lemmings lying dazed at the bottom of a cliff face are those who invested in the group buying hype of the last two years.

    Market leader Groupon is now reportedly moving away from daily deals to ‘always on’ deals, which kills the whole point of group buying sites. Most of the copycats are already dead.

    Former Cudo CEO Billy Tucker predicts that in the Australian market – which was flooded by a wave of Groupon imitators in 2010 and 11 – will only have a dozen survivors out of the top 50 listed earlier this year.

    Investors in these look-a-like services had a gamble that a greater fool would buy the operation, usually a big corporation run by executives with a fear of missing out. The ones who missed out quietly swallowed their losses and moved on to the next mania – which appears to be taxi apps.

    For the taxi applications, the buyers of the apps will probably be the incumbent gatekeepers, who aren’t really fools at all.

    It wouldn’t be surprising to find the smarter look-a-like operators are already talking to the taxi companies about an app which will, miraculously, comply with all the requirements of the local regulators.

    As for the rest, they’ll do their dough.

    What is going to be interesting though is the battle between Uber and the various taxi regulators around the world, particularly in countries where politicians jump to the whims of their business cronies.

    *lemmings don’t really throw themselves off cliffs, that myth was invented by the Walt Disney Corporation. Sadly Australian, particularly NSW, politicians favouring ticket clippers and rent seekers is no myth.

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