management | Paul Wallbank - Communications Professional

Australia’s lost business agility

The latest IMD digital competitiveness ratings show Australia sliding down the ranks, how can we address this decline?

The recent digital competitive index by Swiss business school IMD, flagged a worrying trend in Australian industry, reporting the nation’s commercial sector is falling behind its international counterparts in digital competitiveness.

Overall the IMD’s digital competitive rankings weren’t terrible for Australia with the nation only sliding one place to 15th globally from its 2018 place — albeit down from ninth five years ago.

But the indicators that kept Australia in the top 20 were in the nation’s international student numbers and the national credit rating, hardly the mark of an economy on the leading edge.

Jarringly, the survey ranked the nation’s business agility, 45th out of the 63 economies surveyed.

IMD’s definition of an economy’s business agility includes the local industry’s adoption of big data, IT integration, concentration of robots and local companies’ ability to respond to opportunities among other factors.

For those of us who’ve spent the last two decades proselytising about the importance of investing in technology, the fall was disappointing but unsurprising as Australia has long been lagging in its digital investments.

The answers to why this is happened over a twenty year period that saw Australia become one of the world’s richest economies lies mainly in the investment priorities and opportunities of the nation’s small business and corporate sectors.

With the exception of the mining industry, Australian corporations aren’t globally focused. Most of the nation’s large corporations are domestically facing service providers like banks, telcos, toll road operators and supermarkets which sees them focused on maximising local profits rather than competing in international markets.

Most of them also operate as duopolies or monopolies, so much so that in most sectors, Australia can be described as the ‘Noah’s Ark of business’.

Added to that, those dominant local corporates have shareholders addicted to high dividends., in turn reducing the funds available for reinvesting in the businesses.

When Australian corporates do invest in digital technologies, it’s almost always to slash costs. A mindset which leads them into disastrous deals with global IT outsourcers and tech vendors.

Of course continual failure on that level doesn’t matter when you can pass the costs of failure onto customers by increasing milk prices or credit card fees.

For the small business sector there’s a slightly different set of constraints, however with most SMB’s also being local service providers they haven’t needed to invest to stay competitive.

But small businesses trying to compete in global markets, or looking to invest invest, face another problem — accessing capital.

Over the last 30 years, Australia’s small business sector has been frozen out of bank lending with loans only accessible to proprietors able to pledge 100% collateral — usually home equity — against their loans.

For providing effectively risk free loans Australian banks charged handsomely, helping make them the profitable banks on the planet, something that was missed in the weak, and dare one say naive, conclusions of the Hayne Royal Commission into the nation’s finance industry.

The upshot of the banks’ refusal to lend to small businesses means their investment and subsequent productivity has stagnated and fewer have been able to compete in global markets.

So Australia’s fall in competitive indexes isn’t surprising and it’s an added handbrake on the economy as the government struggles with flat income growth, stagnant private sector employment rates and declining GDP per capita.

Fixing these roadblocks is wholly up to government — the banking system needs to be reformed, taxation policies need to be overhauled and serious consideration has to be made about breaking up the nation’s more inefficient and dominant corporates to stimulate domestic competition and innovation.

Sadly, there’s little recognition of the problem among Australian’s politicians, bureaucrats, business leaders or media and, one suspects, there’s no appetite for meaningful reform.

So Australia will muddle along for the moment, but its hard to see how living standards can be maintained as the country’s business sector stagnates.

Which is the real warning from the IMD.

GE’s Predix predicament – an industrial giant finds software is hard

GE’s IoT predicament illustrates just how complex the engineering and management challenges of the Internet of Things really are.

Industrial giant General Electric is finding software is hard, reports Business Insider.

The company, which former CEO Jeff Immelt declared was a ‘digital industrial company’ is finding its Predix software system and associated cloud services are far more complex and difficult to manage than expected.

Back in 2015, I toured the head office of GE Software outside of Silicon Valley and interviewed the division’s boss, Bill Ruh.

Ruh was upbeat about the internet of things – or Industrial Internet in GE’s terminology – with an estimate the IoT was worth $14 billion to the company as it found new efficiencies and markets.

Today that vision’s looking a little tarnished as the company struggles with a 25% share price drop and a self imposed ‘time out’ on Predix’s development.

GE’s IoT predicament illustrates just how complex the engineering and management challenges of the Internet of Things really are.

The software needs of a sensor in a train brake pad are very different to that of fuel pump in a jet engine or the blade controllers of wind turbine.

Added to that is the challenge of organising, storing and securing the information these devices collect. This is the main reason why GE is moving its data management services to AWS and Microsoft Azure.

That a company with the resources and top level commitment of GE is struggling with this underscores the complexity of the internet of things. That complexity is something every IoT advocate and connected device vendor fails to consider at their, and their customer’s, peril.

A monument to a modern pharaoh: Links of the week

Some of this week’s highlights included the auto industry’s changing business model, inside Microsoft’s Vista mistake and Apple’s memorial to a modern pharaoh.

Starting a new job makes keeping the website up to date difficult but it is possible to get some reading done. Some of this week’s highlights included the auto industry’s changing business model, inside Microsoft’s Vista mistake and Apple’s memorial to a modern pharaoh.

A monument to a modern pharaoh

Apple Park is an anachronism wrapped in glass, tucked into a neighborhood says Wired’s Adam Rodgers. However his main point is Apple’s new five billion dollar new headquarters is really just a memorial to Steve Jobs and his ego.

Dissecting a dying business model

The car industry is one sector in a perfect storm of disruption and Australia’s General Motors Holden is slashing its dealer network to deal with declining demand and technological change.

Notably in the story is what happens to the dealers when their contract with GMH is cut with the franchisees having to hand over tools, signage and manuals. It shows just how the corporation controlled its franchisees.

Where Vista went wrong

This blog has long maintained that Microsoft’s release of the Vista operating system was not only the biggest mistake the company ever made but also gave an opening for Apple, Google and Amazon to seize the computer market.

So a post from developer Terry Crowley a former Microsoft developer is an insight into how the process went wrong. His view on internal cultures for companies facing market disruption is telling.

“In fact, the more power you hold, the more accountable you need to be to open yourself to honest challenge on either facts or logic. This is even more critical in times of rapid change because the facts and consequential logic might change. Accountability and transparency means you are able to reassess your conclusions and react quickly.”

The Life and times of Jerry Brown

An excellent interview between US political commentator David Axelrod and California governor Jerry Brown ranges over topics from Ronald Reagan’s rise, today’s hostility to government and his Asian travels while in the political wilderness. It’s worth a listen.

Clash of car cultures

The partnership break down between Ford and Google shows how hard it can be for conflicting cultures to work together

With tech companies piling into the automotive industry – with varying results – it’s not surprising the established auto manufacturers are looking at making alliances with their potential Silicon Valley competitors.

Ford’s alliance with Google was one of the most promising in the sector, however it fell apart in a classic clash of cultures as Automotive News reports.

One of the key differences in the cultural crash was the priority of the two businesses – for Ford this is about the future of the company while for Google autonomous vehicles are just another moonshot.

Coupled with that, Ford are locked into their traditional products and have a sceptical Wall Street to keep happy as Automotive News describe when the two company’s CEO’s met.

In early December 2015, Fields came to Silicon Valley to discuss the deal with Google co-founder Sergey Brin. In a region where there are so many electric cars that office workers often argue over charging stations to plug in their Teslas and Nissan Leafs during the workday, Fields showed up at Google with an army of staffers in a fleet of Lincoln Navigators. Sources said Fields and his team were armed with a plan to make a big splash out of the partnership news, and much of the discussion centered around making an impression on Wall Street.

With Google being generally secretive about their ‘moonshot’ programs, it’s not surprising Sergey Brin and his team were perturbed by Ford planning to make a big announcement about the partnership. Had the auto maker done its due diligence, their delegation would have been a lot less ambitious and lot more circumspect.

Ford’s casting around for tech partners also illustrates the management didn’t understand the tech industry’s politics and dynamics, not only do they have a long standing agreement with Microsoft on their Sync product but they were also touting an alliance with Amazon to incorporate Alexa into their cars.

While there’s undoubtedly some revisionism in the Automotive News story – there’s always some airbrushing of history when a new CEO takes over – the tale does illustrate the difficulties facing business owners and managers when building alliances with others who don’t necessarily have the same objectives.

A clash of cultures is always tough to overcome and that’s often the biggest challenge facing industrial giants like Ford as they deal with a rapidly changing world.

The myths of dead brands – busting disruption stories

Blockbuster, Nokia and Kodak are cited as victims of digital disruption. Things however are not so straightforward.

“These three brands have one thing in common – they’ve all been destroyed by digital disruption,” says one business commentator in a recent presentation.

He cited three names; Kodak, Nokia and Blockbuster.

It’s a nice, and often repeated meme, which is only really true of Blockbuster which failed to adapt to a changing market and could be a perfect example of a transition effect although some don’t buy the digital disruption reason for the company’s demise.

Giving lie to the idea the company was a victim of Netflix’s rise, a former Blockbuster executive puts the chain’s bankruptcy down to management not understanding the company’s role in the market, and that it was in decline long before the streaming service’s arrival.

A more fundamental problem with the statement is both Nokia and Kodak are still in business too, the latter having come out Chapter 11 financial in late 2013.

Finland’s Nokia is somewhat more complex than Kodak or Blockbuster, having been founded as a paper pulp mill in 1865.

The company became a global brand thanks to being a leader in mobile phones prior to the iPhone disrupting the market but the name faded as the Apple and a new breed of East Asian manufacturers came to dominate the market.

Despite fading as a consumer brand, the company is still a major player in telecommunications – being a major supplier of cellular base stations – along with a range of other technologies.

Both Kodak and Nokia are still very much alive, albeit no longer being recognised by the average consumer.

There are major lessons from both companies for those studying the effects of technological disruption on brands and businesses. Even Blockbuster’s mistakes in the face of a changing and declining market has many lessons.

Citing them as examples of ‘digital extinction’ though is untrue and almost certainly unhelpful in understanding what management can do to respond to new technology or societal shifts.

Being an industrial revolutionary

The World Economic Forum’s Nicholas Davis on being an ‘industrial revolutionary’ in the digital age.

“The future isn’t pre-determined, technology doesn’t come from some outside force. It’s created by us. Some people have more power than others in that system, such as the big tech entrepreneurs, but at the end it’s people and organisations that have the power.”

Nicholas Davis, the World Economic Forum’s Head of Society and Innovation, was discussing at the recent Sydney CeBIT conference how we can take control of the digital economy and where workers fit into an increasingly automated world.

Technology and online platforms aren’t neutral system, Davis observes. “It’s not just about how we use them, but the values that are designed into the systems, technology is not just a neutral thing. During a conversation like this if I put my iPhone between us, it’s proven that reduces our memory of that discussion and our sense of connection.”

Politics and addiction

“The purpose of the technology, the design of it, affects us in different ways.” Davis says, “if we design technologies for addiction, if we design business models that involve us being sucked into systems at the expense of other things in our lives, then that is a value choice that companies make and that we as users are trading off in our lives.”

“In understanding that technology is not neutral then the question is how we, as revolutionaries have that political discussion? I don’t mean political like ‘Left’ and ‘Right’ but these are value decisions that we need to engage with.”

“The difficulties about having discussions about technology is not getting sucked into a left-right divide and letting one group of people own innovation, but to say what do we want, How do we get there and how do we avoid the mistakes of previous industrial revolutions where the environment suffered, kids suffered and vulnerable populations suffered.”

A change in thinking

“One of the biggest problems is we don’t have regulatory or even democratic institutions where we can make collective decisions about technologies,” says Davis.

“The average AI researcher, at the top of their game anywhere in the world, would only understand a small percentage of the AI space. So how do you expect a politician or a voter, to come to grips with it.”

One of the key discussions missing in the public sphere is around automation and concepts like the Universal Basic Income, Davis believes. “We should have a serious chat about giving everyone the space to build up their skills.”

In the development policy, Davis sees growing inequality and applying last century’s thinking to today’s challenges as among the biggest risks facing governments and communities.

Rippling beyond business

For business, the imperative is to recognise the effects of decisions on the wider community.

“The big thing for business is understanding the technology decisions you make have a ripple effect beyond your company, you need to look forward to new ways of value adding.”

Davis warns we are seeing a backlash against innovation and technology with concerns about privacy and security growing.

“So much of the world is build on their use of data. Most companies and organisations don’t have good data hygiene or ontology to classify their information. People say data is their greatest assets – some say it’s the new oil – but it’s also their greatest liability. So understanding information security at the board level is critical.”

The power of individuals

For individuals, Davis believes the power lies with us in the choices we make as consumers.

“Don’t underestimate your own power, but also don’t underestimate that more and more products around us are designed to influence our behaviour in ways we need to be aware of.”

“In most cases, if the product is free then you and your data are the product, understand that and on what terms is important.”

Conscious choices

“Understand the externalities of these services as well. Appreciate the effects it has on your family, your mental health, on the ability to connect is important. Being able to make conscious choices about these things.”

“Supporting open data standards and competition – not just accepting Android or Apple for instance – rather than allowing politicians and big business to fight over these things.”

So in Davis’ view being an ‘industrial revolutionary’ in the digital era is a matter of being an informed, and empowered, consumer. Will that be enough?

Tinny vapid crap – last week’s links

Links for last week – from Apple’s child free campus and the NBN’s coffee machines to Elton John’s take on modern pop music.

Last week was an interesting time with an appearance before a Senate Committee and a trip to regional Victoria to talk about the media and social justice.

While busy, there was time to read some fascinating articles ranging from Elton’s John’s views on modern pop music, software lawsuits and early losses in the war on ‘fake news’ through to how the shiny new Apple campus boast almost everything for employees except a childcare centre.

Parents need not apply

Apple’s new 5 billion dollar campus is the realisation of Steve Jobs’ final vision. It boasts a hundred thousand square foot gym and an attention to detail that extends to the sand used to make the windows.

But it doesn’t have a day care centre, which gives a pretty clear message to aspiring employees – if you don’t have a stay at home spouse, something pretty rare in the hyper expensive Silicon Valley, then don’t bother applying.

Thanks a latte

Meanwhile in Australia, the government financed National Broadband Network is spending half a million dollars a year on maintaining its staff coffee machines.

While the money is small change in a project recent estimates put at costing $56 billion, it is emblematic of how far from its original purpose the vision has drifted.

Facebook Fails to Tackle ‘Fake News’

The social media’s attempts to tackle ‘Fake News’ are failing dismally reports The Guardian as reactionary groups gleefully reshare and publicise anything flagged as such.

While it’s early days, this isn’t a good start for Facebook although it also illustrates how powerful filter bubbles are and the lengths people will go to spread their ideologies.

The lawyers always win

Lasts week’s ransomware scares will trigger lawsuits says Reuters, quoting several legal experts.

Unsurprisingly, it won’t be Microsoft who’ll be the target given their almost bulletproof terms and conditions but businesses who didn’t patch their systems could be liable.

Fox News’ founder passes

Roger Ailes, the founder of Fox News and one time Nixon adviser, passes a few months after being ousted from the network he created.

Ailes personified the tabloidisation of the media as Rupert Murdoch applied the model which had worked so well for him at The Sun in the UK to newspapers and television in the United States.

Many blame the internet for the click bait, sensational model of modern news reporting but the pattern was well established by the time the World Wide Web came along in the mid 1990s.

Tinny, vapid crap

Elton John weighs in on the state of pop music.

Clerks, Dying Videos and Culture Clashes: Links of the week

The race to rescue VHS tapes, how Ford lost Google and the fascinating world of London legal clerks are among last week’s interesting links.

London clerks

Inside the antiquated, but very lucrative, world of London barristers’ clerks. A fascinating a look at one aspect of the English legal profession where old traditions have conveniently merged with modern fees.

Saving VHS tapes

One of the banes of modern culture is shifting standards. As VHS tapes decay, researchers are racing to preserve the culture of the 1980s and 90s, reports US National Public Radio.

Google and Ford clash cultures

Joint ventures and business partnerships are often problematic, as Ford found in their abortive autonomous vehicle project with Google.

How your next CEO could be a robot

The path to management is changing as the connected workplace evolves, but it may well be the top jobs themselves will soon be automated.

“In 30 years, a robot will likely be on the cover of Time Magazine as the best CEO,” Alibaba founder Jack Ma said told a technology conference in Zengzhou, China, last weekend.

One of the things underestimated about this wave of automation is how AI will be applied to management, Knowledge Management expert Euan Semple makes an important point how being supervised by a bot could be a lot fairer and transparent than human managers.

In the normal course of work many people don’t see much of their manager. Too often the experience is frustrating and unhelpful. The predictability and transparency of automated systems could potentially be fairer and more effective than an incompetent, prejudiced, or bullying manager.

The news for those looking at climbing the greasy management pole through getting professional qualifications isn’t good either, reports the BBC.

For the last fifty years, getting an accounting or law degree, often supplemented by an MBA, was the best path for a management position but shifting work patterns and technology is devaluing those qualifications while it’s appearing there will be less management positions anyway.

Tomorrow’s workplace is going to look very different to that of the past half century. Those of us currently in the workforce, as well today’s kids, need to be looking closely at the skills they have for a very different world.

How the movies beat disruption

With the movie industry’s Academy Awards taking place last night, albeit not without mishaps, it’s worth reflecting on how Hollywood has defended itself against a range of disruptions.

With the movie industry’s Academy Awards taking place last night, albeit not without mishaps, it’s worth reflecting on how Hollywood has defended itself against a range of disruptions over the last century.

From when the first movie was shown by the Lumiere brothers in Paris just after Christmas 1895, cinema has been both a disruptive force and one that’s been subject to its own challenges.

The immediate effect of the new technology was an explosion of new businesses, trades and techniques not dissimilar to the first dot com boom of the early days of the web as the traditional theatre industry was displaced by movie theatres.

As the technology evolved, the movie industry itself was subject to disruption as sound was developed – ending the careers of many silent film stars – followed by colour both of which allowed new techniques and markets to developed.

Then came television and, it would have seemed, the end of the movie industry. Although that didn’t happen and it’s instructive how the industry reacted to the challenge.

In a 2007 paper, academics Barak Orbach and Liran Einav showed the movie industry’s evolution starting just after the introduction of talkies in 1927.

The shift to sound drove the movie industry to its all time heights prior to the Great Depression, however the economic downturn hit the film business hard – something to consider when people talk about the ‘lipstick effect’ -however steady growth returned through the 1930s and until the end of World War II.

Following the war, economic change and the arrival of television were tough for the movie business as attendances fell dramatically until stabilising in the late 1960s. Interestingly, the price of movie tickets went up dramatically shortly before the decline tapered off.

The graph finishes at 2002, at the end of the first internet boom and it’s notable the early days of the web, or the rise of Pay-TV in the 1970s and the Video Cassette Recorder in the 1980s had little effect on the industry’s attendance figures.

Despite those new technologies, the movie industry managed to attract audiences despite the plethora of entertainment options on offer at home.

Much of this was due to technological change with advances in computer generated graphics and recording techniques giving film makers far more creative scope while the roll out of multiplex cinema complexes allowed patrons far greater choice in movies.

Fifteen years later the effects of technology are still telling. In 2002, the average American was buying five movie tickets a year, according to the 2016 Motion Picture Association of America’s annual report this had fallen to 3.8, no doubt partly due to the success of Netflix.

However the film industry has still remained lucrative, partly through developing alternative streams of income like product licensing and international sales – China is by far the US industry’s biggest market and non-North American sales are growing by 21%. At the consumer level, movie houses increasingly make their money from concession sales and add-ons like premium seating.

So the answers to the movie industry’s success in staying profitable in the face of disruptive technologies seems to be in adopting new tech, diversifying income streams and globalising their product – although a bit of legislative protection in extending copyright probably helps.

The lessons though from a century of disruption though are clear, how well the movie industry responds to continuing disruption from the likes of streaming services like Amazon Prime, Netflix and their Chinese equivalents remains to be seen.

When is a Chief Digital Officer needed?

The contrasting attitudes of Sydney, Melbourne and Brisbane towards the need of a Chief Digital Officer tell us much about how that role fits into an organisation

Last week the City of Sydney and councillor Jess Scully came under fire for an apparent backflip about the need for a Chief Digital Officer.

Scully, who was elected at last year’s council elections, told InnovationAus “the idea of a CDO or chief innovation officer seems a little bit redundant” a day before the organisation advertised for ‘chief, technology and digital services officer’.

To be fair to Scully, the roles being advertised by the City of Sydney were not truly CDOs in the way Brisbane, which has a small business focus, and Melbourne’s city councils have appointed them however it raises the question of whether Scully is right that an organisation doesn’t need a Chief Digital Officer.

As with most questions of this nature, the answer seems to be ‘it depends’. A key part of that discussion is where a CDO sits in an organisation. If they are senior executive or even board role, then it’s likely they are going to come into conflict with other c-suite managers such as the COO and CFO.

What’s worse, such a conflict in the c-suite can mean digital issues can be seen as ‘belonging’ to the CDO and not other key business units, which can only be to the detriment of the organisation.

There’s an argument too that the changes to organisations is so great from the changing economy and emerging technologies that responsibility of understanding and dealing with these changes is the role of the CEO and the board.

Where a CDO can be very effective is being an advocate for change and a trusted adviser to senior management, however even there risks lie as identified by Paul Shetler who found the siloing of agencies within the Australian Public Service meant it was very hard to effect any change in the face of resistance from an organisation’s vested interests.

It seems from the story that the City of Sydney has chosen an advocate and support role for the digital officer position, rather than formalise a CDO position who becomes a figurehead for the organisation’s digital evolution.

For a CDO or any technology advocate to be effective, there has to be support from the board and senior management. A technologist can only drive change if they have a mandate from the top.

Even then in some organisations the culture may be so factionalised that the response to change and drive for digital transformation has to come from the existing powerbrokers and a CDO could be at best a hindrance and even obstruct the process.

So the City of Sydney and Jess Scully aren’t wrong in not having a Chief Digital Officer, and neither are Melbourne and Brisbane for having one, it’s a deliberate decision by the various managements to choose the structure and roles that works best for their organisation. Driving change though always remains the responsibility of the board and the CEO they appoint.