Apr 072014

Around the world manufacturers are wondering how they adapt to the rise of 3D printing nod the continued challenge of China’s low costs of production.

In Singapore, Reuters reports, the government is putting its hopes on new technology boosting the country’s manufacturing industry in one of the world’s highest cost centers.

“The future of manufacturing for us is about disruptive technologies, areas like 3D printing, automation and robotics,” EDB Managing Director Yeoh Keat Chuan told Reuters.

Britain too is experimenting with modern technologies as the BBC’s World of Business reports about how the country is reinventing its manufacturing industry.

Tim Chapman of the University of Sheffield’s Advanced Manufacturing Research Centre describes how the economics of manufacturing changes in a high cost economy with an simple advance in machining rotor disks for Rolls-Royce Trent jet engines.

“These quite complex shaped grooves were taking 54 minutes of machining to make each of these slots. Rolls-Royce came to us and said can ‘can you improve the efficiency of this? Can you cut these slots faster.”

“We reduced the cutting time from 54 minutes to 90 seconds.”

“That’s the kind of process improvement that companies need to achieve to manufacture in the UK.”

Interestingly many of those British engineers interviewed by Peter Day in the BBC report focus on China’s cheap labor as being the driver for moving up the value chain and automating

Dismissing China as purely a low cost producer a risk as Chinese manufacturers are working hard to move up the value chain as their aging populating erodes their labor advantage.

The last word though for Britain’s engineering sector has to go to Hugh Facey, founder of wire tool company, Gripple.

“Are you a rich man?”
“Do you mind?”
“I’m from Yorkshire.”

Both Singapore and the UK are working on establishing their positions in the 21st Century economy; both business owners and individuals have to give some thought on where they want to be.

For manufacturing, the rollout of new technologies means the industry is going to look very different in the next decade. It won’t be the only industry radically changed.

Mar 162014

Last year car rental giant AvisBudget acquired the vehicle sharing service Zipcar, at the time it looked like the established player was buying in the tech smarts of younger startup.

Citing ‘synergies’ at the time of a takeover is always a warning sign that a corporate acquisition may not go well and so it has proved with Avis’ efforts with Zipcar as travel news site Skift reports;

Speaking at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas earlier this week, AvisBudget CEO Ron Nelson said fleet-sharing has turned out to be more complicated than the company thought because there’s a cost tied to moving the vehicles from one location to another.

That’s a strange statement as a casual observer would be forgiven for thinking that if any organisation understood the costs of moving vehicles around it would be a car hire company.

Apparently that’s not the case and the ‘synergies’ from acquisition will be pushed back to 2015.

Synergies are elusive things and it may well prove that Ron Nelson would be better served by examining how Zipcar’s technology, algorithms and flat management structures can be applied to a more staid organisation like Avis.

The real value in companies like Zipcar and Uber is the way they are applying technology to moving physical goods around – it’s no surprise that Uber’s Travis Kalanick describes his ambition for the future of his company as being the Amazon for logistics.

For Avis, Zipcar’s opportunities lie in more that just enhancing the company’s fleet utilization; understanding the marketplace and predicting demand is where the real gains could be made.

Mar 032014
business customer service is essential in the new economy

When it comes to customer service businesses, Alex Bard calls himself a ‘career entrepreneur’, having founded four startups in the field since the mid 1990s.

In 2011 he sold his most recent business, Assist.ly, to Salesforce and became the company’s Vice President for Service Cloud and the Desk.com customer service offerings.

Bard tolds Decoding the New Economy last week how social media and Big Data are radically changing how organisations respond to the needs of their clients.

“I’ve been in the industry for twenty years and I’ve never been excited as I am now,” Bard says. “The real transformational things that’s happening now are these revolutions – the social revolution, the mobile revolution, the connected revolution.”

The philosophy of customer service

“What they’re really driving is this idea that customer service is no longer a department, it’s a philosophy.”

“It’s a philosophy that has to permeate throughout the organisation. Everybody in the company has a role in support. It’s not just about a call centre or a contact centre or even an engagement center which is what these things are called today.”

“I really don’t like the word ‘centre’ because I really fundamentally believe that everbody in that company has to interact with customers, has to engage and has to the information – no matter they are – about that customer to provide context.”

Abolishing the service visit

With the Internet of Things, Bard sees GE’s social media connected jet engine as illustrating the future of customer service where smart machines improve customer service.

“They’re going to capture more data in one year than in their entire 96 year history prior,” says Bard. “With that data they’ll be able to analyse and do things on behalf of that product or service that’ll reduce the number of issues.”

“Because the best service of all is one that doesn’t have to happen.”

In this respect, Bard is endorsing the views of his college Peter Coffee who told Decoding the New Economy last year that the internet of machines may well abolish the service visit.

“Connecting devices is an extraordinary thing,” says Coffee. “It takes things that we used to think we understood and turns them inside out.”

“If you are working with connected products you can identify behaviours across the entire population of those products long before they become gross enough to bother the customer.”

For Alex Bard, the customer service evolution has followed his own entrepreneurial career having evolved from being personal computer based in the 1990s to today’s industry that relies on cloud computing, big data and social media technologies.

As these technologies roll out across industry, businesses who adopt the customer service philosophy Bard describes are much more likely to adapt to the disruptions we’re seeing across the economy. Changing corporate cultures is one of the great tasks ahead for modern executives.

Mar 012014
now hiring happy workers

Last October, ahead of the company’s Orlando Symposium, Gartner Research Director Kenneth Brant released a paper looking at the effects of technology on the workplace.

“Most business and thought leaders underestimate the potential of smart machines to take over millions of middle-class jobs in the coming decades,” Brant wrote. “Job destruction will happen at a faster pace, with machine-driven job elimination overwhelming the market’s ability to create valuable new ones.”

Brant’s view about middle class jobs is a sobering thought, many of the corporate ‘knowledge worker’ positions can be easily replaced by computers to make the decisions now being made by armies of mid level managers, bean counters and clerks.

Indeed the whole concept of ‘knowledge worker’ that was fashionable in the 1980s and early 90s in describing the post-industrial workforce of nations like the US, Britain and Australia is undermined by the rise of powerful computers and well crafted algorithms to do the jobs unemployed steel workers and seamstresses were going to do.

Twenty years later and the ‘knowledge workers’ had morphed into the ‘creative class’ and it appears the computers are coming for them, too.

Personally, I subscribe to the view in the medium to long term new jobs in new industries will evolve – a view shared by economists like GE’s chief economist, Marco Annunziata.

Over the next decade however there’s no doubt we’ll be seeing great disruption to established industries and the hostility to Google buses in San Francisco may be just an early taste of a greater antagonism to the technology community in general.

For managers, the problems are more complex; while their own departments, corporate power bases and even their own jobs are at risk, they are going to have to find ways to incorporate these changes into their own business. Gartner warns CIOs in its briefing paper;

The impact will be such that firms that have not begun to develop programs and policies for a “digital workforce” by 2015 will not perform in the top quartile for productivity and operating profit margin improvement in their industry by 2020. As a direct result, the careers of CIOs who do not begin to champion digital workforce initiatives with their peers in the C-suite by 2015 will be cut short by 2023.

Few industries are going to be untouched by the disruptions of the next decade and the resultant job losses are going to present challenges for all of us.

Feb 202014
Demonstrating the benefits of the national broadband network

I swore – mainly for my own sanity – that I wouldn’t discuss Australia’s National Broadband Network on this site anymore, today though the topic raised an interesting point about business leadership and project management that can’t be ignored.

Australian Communications Minister Malcolm Turnbull today released the Broadband Availability and Quality Report (PDF) along with the accompanying My Broadband website that identifies the nation’s telecommunications blackspots.

“It is extraordinary that in six years of Labor talking about Australians having inadequate broadband they never bothered to do the work of actually identifying where services were good, bad or indifferent,” said the minister at the announcement.

Turnbull’s comments are correct, although the criticism is just as valid of previous Liberal and Labor governments who’d made incredibly poor decisions in the telecommunications portfolio without considering what was actually happening outside the ministers’ offices.

A bigger lesson though is that before commissioning a project the size of the NBN – estimates have put its cost anywhere between twenty and eighty billion US dollars – it’s a good idea to know where you are are and where you want to go.

Big Hairy Audacious Goals

To put the comments that follow into perspective, I was a supporter of the NBN concept although I thought it was a Big Hairy Audacious Goal.

In the shadow of the Global Financial Crisis the NBN project ticked all the boxes; it put cash into the economy, it employed an army of workers and upgraded Australia’s telecommunications network that had been neglected by thirty years of incompetent government policies mixed with incumbent telco greed.

Australia could have afforded ten NBNs during the mining boom of the 2000s; it was an opportunity to rebuild the nation’s ports, roads, railways, schools and tax system that all needed reinvestment and reinvention to meet the needs of the 21st Century.

Building a middle class welfare nanny state

Rather than reform the economy or build modern infrastructure, the Howard Liberal government decided to spend the mining boom’s proceeds on building a middle class welfare state.

Keen students of Australian politics crack a wry smile that the recently elected Abbott Liberal government, of which Turnbull is a member, proposes a paid parental scheme that will complete John Howard’s grand vision of a Middle Class Welfare Nanny State.

One of the tragedies of the populist and cowardly Gillard and Rudd Labor governments that succeeded Howard was neither had the courage to dismantle the Liberal party’s middle class welfare state.

At least though both Rudd and Gillard were prepared to make some big infrastructure investments, even if they weren’t fully thought through and chronically underfunded.

Failing to think through the needs, scope and costs of the project meant the National Broadband Network project quickly collapsed into a managerial mess exacerbated by the dribbling incompetence of the company’s executives, government officials and contractors, which bought us to Turnbull’s announcement today.

A project in search of a scope

The project’s failure is a worrying commentary on the abilities of Australia’s management elites in both the private and public sector, however the lesson for the entire world is understanding both where you are and where you want to go to is essential for a project’s success.

Spending on well planned and necessary infrastructure is good, but to avoid disasters like Australia’s NBN it’s good to start with understanding the problems you want to fix and a project scope that clearly identifies the work that needs to be done.

Unfortunately too many governments and businesses don’t know where they are or where their plans will take them.

Feb 152014

“How do we move to an exponential approach to innovation” asks John Hagel, Director of Delioitte’s Centre for the Edge in the latest Decoding the New Economy video.

The Centre For The Edge is Deloitte’s Silicon Valley based think tank that identifies and explores emerging opportunities related to big shifts that are not yet on the senior management agenda.

John tells us how the cycles of change and innovation have varied over the last thirty years in the industry; “the biggest thing for me is that nothing is stabilising. I often go back into history and look at things like electricity, the steam engine and the telephone – all hugely disruptive to business practices.”

“But the interesting pattern is they all had a burst of innovation and then a levelling off,” says John . “You could stabilise and figure out how to use all this technology.”

“With digital technology there is no stabilisation.”

That lack of stabilisation leads to what John has termed ‘exponential innovation‘ where he sees business and education being rapidly transformed as technology upends established practices and methods.

Healthcare, financial services and “any industry that has a high degree of information content ” are the sectors currently facing the greatest challenges in John’s view.

John sees the solution for businesses and managers in looking at the current era not as a time of technology innovation but of institutional innovation. That institutions, like companies, have to reinvent how they are organised.

Reinventing well established companies or centuries old bureaucracies is a massive challenge, but if John Hagel’s view is right then that radical change to institutions is what is going to be needed to face a rapidly changing society.

Bank image by Ben Earwicker, Garrison Photography of Boise, ID through sxc.hu

Jan 312014
sales going cheap

Does tying together two lame men give you an Olympic sprinter?

It’s quite common in the business world to see two second rate companies merging in the hope that their combined market share will give them enough momentum to overcoming the market leader.

The tactic rarely works as the businesses running third, fourth or fifth in a market are usually doing so because they have ordinary products or indifferent management rather than any inherited size disadvantage.

Merging two second-rate companies usually results with a pair of competing silos of mediocrity where the former workforce and management of the original business squabble over power in the new entity.

Far from being more competitive, the merged company is even more distracted with internal politics and power plays.

The story that Australian department store Myer proposed a merger with its rival David Jones is a very good example of this as two poorly run companies whose managements that have abjectly failed to adapt to the modern times, try to paper over their chronic problems by merging.

Both companies have failed internet strategies – Myer’s website managed to collapse during the Christmas sales season and no-one could be bothered fixing it for over week.

Along with lousy internet strategies, both companies have underinvested in IT systems leaving their point of sales and logistics systems antiquated and incapable of meeting modern customers’ needs.

Probably the greatest mistake that Myer and David Jones’ management made though was a focus on cutting costs through reducing sales staff.

The resulting lousy and often pathetic service resulted in both brands being seriously tarnished and had the effect of driving high value customers away.

Further damaging the stores reputation was the tactic of offering perpetual sales which trained the customers that would still shop with them into waiting for goods to be marked down rather than paying full price.

Merging the two operations would have done little to resolve any of the long term management failings of the two businesses, although no doubt there would have been some fat advisors fees for some of the boards’ friends.

Nothing fixes poor management better than getting rid of the poor managers, merging two poorly run business like Myer and David Jones does nothing.

Retailers failing as their poor management struggles to deal with changing marketplaces is an international problem, as this story about US chain Sears illustrates. The Australian experience though is a classic case study of two poorly led organisations trying to pretend their failings can be fixed through mergers.

Resolving the problems of troubled companies like Sears, David Jones and Myer involves having good management and smart investment, merging with a similarly troubled organisation solves little except perhaps putting off the day of reckoning.