A San Francisco taxi company reinvents itself for the app economy.
Taxis have gotten their ass kicked” says Hansu Kim, owner of San Francisco’s oldest taxi company.
Kim’s company, DeSoto, is changing the name it has held since the 1930s to Flywheel in an agreement with the taxi hailing app of the same name. The San Francisco Chronical describes how DeSoto and the city’s other taxi companies are finding times tough now Uber and other services have moved into what was a safe, regulated business.
DeSoto’s move is a sign of the times as older business models evolve; moving to an app based hailing service improves the experience for everybody in the cab industry and radically changes the economics of getting a ride across town.
The main reason for Uber’s success is being able to identify both drivers and passengers which improved confidence in the system. In turn, this changes riders expectations and taxi’s fare structures.
For companies competing with Flywheel the question will be do they participate in this service or do they create their own app. For the industry in general it makes sense to share the infrastructure but for uses it may well be in their interest to have competing apps with different levels of service.
As the levels of car ownership continue to fall, how taxi hailing and car hire apps evolve will drive the development of our cities through this century. DeSoto and Flywheel’s experiment is the start of many as older businesses adapt to a changing economy.
Surveying 27,000 participants around the world, Edelman follows up with questions to what they call ‘informed publics’; 6,000 college-educated followers of business and news media with a household income in their country’s and age group’s top 25%.
Across the board trust in institutions have fallen with nearly 60% of countries falling into the ‘distruster’ category and the news isn’t good for businesses and governments.
That decline in trust is a striking result given the ‘informed publics’ cohort are their country’s middle class and it shows the stresses being felt in affluent groups.
“There has been a startling decrease in trust across all institutions driven by the unpredictable and unimaginable events of 2014,” the company’s release quotes CEO Richard Edelman. “The spread of Ebola in West Africa; the disappearance of Malaysian Airlines Flight 370, plus two subsequent air disasters; the arrests of top Chinese Government officials; the foreign exchange rate rigging by six global banks; and numerous data breaches, most recently at Sony Pictures by a sovereign nation, have shaken confidence.”
Whether the events of 2014 are responsible for the erosion in trust as Edelman claims is up for debate, the decline of trust in innovation indicates the general atmosphere of mistrust is a much bigger issue.
Trusting innovation
Particularly notable is the Australian result where over half the respondents believe innovation is happening too quickly and that it is being driven by greed. Only some, a piddling 14 percent, see innovation as making the world a better place.
Those results are a concern for a country looking at dealing with a high cost economy. At this stage of Australia’s development it’s necessary for industry and society to be implementing new ways of doing business, not looking back to the past.
One shift that marks a change in society is that online search engines are now more trusted than the media outlets that provide the news, that the population trusts algorithms more than journalists is something that should concentrate the minds of newspaper and magazine proprietors.
Other opportunities for building trust include listening to customer needs and feedback, treating employees well, placing customers ahead of profit and communicating frequently on the state of the business.
Clearly building trust is the task of all staff but it starts with an organisation’s leaders to ensure ethics and openness are rewarded. In that light it’s not surprising that trust is declining given the way unethical financiers and opaque politicians have been the main beneficiaries of the post crisis economy.
While a time of declining trust means our institutions are under great stress, it also means there are great opportunities as well for smart businesses and leaders. The challenge is to show the ethics and openness that the public is calling for.
Is it now the turn of the CIO to go the way of the tea lady
Once every workplace had a tea lady; usually a happy friendly woman who cheefully dispensed tea, buscuits and office gossip around an organisation.
During the 1980s the company tea lady vanished as companies cut costs and changing workplaces made the role redundant, is it now the turn of the CIO to go the way of the tea lady?
Yesterday research company company Frost and Sullivan hosted in a lunch in Sydney outlining their views on the growth of cloud computing based upon their 2014 State Of The Cloud report.
The report itself had few surprises with a forecast of the cloud market growing 30% each year over the next five years, a statistic that won’t surprise many watching how users are moving away from desktop applications.
Shifting procurement
One of the key trends though is how cloud services change the procurement process and lock IT managers and Chief Information Officers out of decision making. As the report says;
Half of all organisations feel that the decision making process is shifting from that of the CIO and IT department to the individual business unit for implementation or updates of cloud applications such as HR, payroll, collaboration and conferencing.
While the report puts a positive spin on what it describes as the “evolving role of IT within organisations”, Mark Dougan – Frost & Sullivan’s Managing Director for Australia and New Zealand – mentioned that often the decision to adopt a cloud service were made by executive management and then the CIO was told to implement the technology.
This illustrates how CIOs’ already tenuous grip on being a senior management role has slipped. With the rise of cloud services, it’s become easier for executives to make choices without considering the technological consequences.
Probably the business that best illustrates this shift has been Salesforce where many corporations find they have dozens of subscriptions being charged to sales managers’ credit cards, much to the chagrin of company accountants and IT managers. Salesforce and similar businesses have driven the trend so far that many consulting firms predict marketing departments will control more technology spending than IT managers in the near future.
That shift predates the coining of the word ‘cloud’, the term “port 80 and a credit card” was used to describe the Salesforce model of sales people signing up to what was then described as Software As A Service (SaaS) earlier in the century.
The electricity and railway industries remain huge employers and are essential to modern business but most for most companies the products are taken for granted – few companies have a Chief Electricity Officer sitting on their executive team despite power being an essential service.
For those IT managers hoping for a senior c-level position or even a seat on the board, the move to the cloud is terrible news. Rather than getting the corner office, the CIO could be heading the way of the tea lady.
The performance of Apple and Microsoft in recent years show two very different management philosophies.
The stunning quarterly results of Apple announced yesterday compared to Microsoft’s indifferent performance illustrate how the fortunes of two different business cultures have changed.
Apple yesterday announced a spectacular result for its quarter finishing at the end of last year with revenues up 30%, profits by 38% and Earnings Per Share just short of fifty percent.
The announcement was an emphatic vindication for Tim Cook and his management team who made some big bets on the larger form factor iPhone 6 which paid off spectacularly with shipments growing 46% to 74.5 million and revenue reaching $51.2 billion, over two thirds of the company’s total sales.
One notable aspect of Apple’s success is the difference with Microsoft’s and this shows how different business cultures come in and out of fashion.
The Triumph of the MBA
For two decades Microsoft’s licensing business model was dominant and this confirmed the MBA view that companies should do everything they can to move design, research, manufacturing and distribution out of their operations – the virtual corporation where there was no inventory, few costs and even fewer risks was the ultimate aim of the modern manager at the turn of the century.
Microsoft encapsulated this philosophy with its licensing model, while the company made massive sales with huge margins – as it still does – all the business risks in the computer market were carried by resellers and equipment manufacturers. For many years the markets loved this.
Apple tinkered with the licensing model under John Sculley in the mid 1990s during Steve Jobs’ exile but was never really serious about giving away its hardware capabilities and in 2001 moved into retail with the opening of the first Apple Store.
Coupled with the App Store, Apple have come to control the entire customer journey from marketing, design, purchase and ongoing revenue after the product is bought.
King of the new Millennium
While the 1980s and 90s were the time of triumph for the Microsoft model, the 2000s have been good to Apple as shown by the revenue and profit figures.
Apple and Microsoft Revenues 2000-2014Apple and Microsoft Profits 2000-2014
The key inflection point in these charts is, of course, the iPhone’s release in 2007. Apple caught the wave of change as computer use switched from personal computers to smartphones and is now the dominant vendor.
For Microsoft the success of Apple is bittersweet; the company had a smartphone operating system in Windows CE but it was too early to the market and the devices vendors went to market with were, at best, substandard.
Microsoft’s failure with the smartphone was also echoed with tablet computers and exposed the licensing model’s reliance on vendors to supply and support decent products, even today Microsoft’s hardware partners struggle to release decent tablet systems.
Cloudy on the web
Another problem that exposed Microsoft’s weaknesses was the rise of the web where hardware and operating systems really did matter so much any more. Along with pushing out personal computer lifecycles it also had the consequence of allowing other systems into the marketplace, notably Linux and Google Android.
With OS X, Android and Linux systems no longer hampered with the compatibility issues that irritated non-Windows users in the 1990s the market was open to adopting those systems. While the PC market has remained quite loyal to Windows, although the Apple Macs are showing serious growth as well, Microsoft’s system has barely any marketshare in other device segments except servers which are also declining as business increasingly move to cloud services.
Apple have shown in the computing and smartphone business that controlling the hardware products is as important as supplying the software, a lesson that Microsoft now acknowledges with its restructure into a ‘Devices and Services’ company under former CEO Steve Ballmer.
Under current CEO Satya Nadella Microsoft is focusing on cloud services which also aren’t as profitable as its legacy operations but see it competing with companies like Amazon and Google who don’t boast the profits from their online operations that Apple makes from its hardware.
Microsoft aside, the lesson Apple gives the technology is pertinent for its competitors in the smartphone space as well; companies like Samsung, LG and the army of Chinese handset vendors are going to find their markets tough unless they can take control of their software development and distribution channels – relying on Google for Android and telcos to get their phones to customers leaves them exposed in similar ways to Microsoft’s partners in the last decade.
In the battle between business models, Apple is the current winner and shows throwing all of your business operations over the fence to partners and licensees is a risky strategy. How those lessons are applied in other sectors will test the limits of both management philosophies.
Business and governments around the world are appointing Chief Transformation, Digital Officers. Do these positions work?
As the scale of technological change facing organisations becomes apparent, managements are appointing Chief Digital Officers to deal with the adjustment. Is this a good idea or just window dressing?
Communications Minister Malcolm Turnbull said the Digital Transformation Office will be charged to co-ordinate the adoption of online services across agencies and state governments.
“The DTO will comprise a small team of developers, designers, researchers and content specialists working across government to develop and coordinate the delivery of digital services,” the Minister’s announcement stated. “The DTO will operate more like a start-up than a traditional government agency, focussing on end-user needs in developing digital services. ”
Minister Turnbull hopes to emulate the UK Office of the Chief Technology Officer which was launched with the intention of delivering streamlined sign ons, simplified government websites and easier access to online services in Britain; although the experience has not been a great success so far.
What’s notable about the UK experience is the CTO came with high level support within cabinet, which gave the agency a mandate within the public service to drive change.
A job without a budget
That the Australian CTO has no budget – its UK equivalent has over £58 million this year – indicates it will not have a similar mandate and will struggle to be little more than a letterhead.
When Digital Officer do have the support of senior executives and ministers, it’s possible to achieve substantial returns. Vivek Kundra, former Chief Information Officer in the Obama administration described to me in an interview two years ago how his office had created a dashboard to monitor government IT projects.
Kundra learned this lesson from his time as the US Government’s CIO where he built an IT Dashboard that gave projects a green, yellow or red light depending upon their status.
Some of these government projects were ten years late and way over budget, the dashboard gave the Obama administration the information required to identify and cut over $3 billion worth of poorly performing contracts in six months.
This is low hanging fruit that a well resourced group with the support of senior management can drive.
Looking beyond end users
A concern though with these CIO positions is they are only looking at part of the problem with the UK, US and Australian teams all focusing on end-users.
While no-one should discount the need for easy to use online services for customers or government users; digital transformation has far greater effects on private and public sector organisations with all aspects of business being dramatically changed.
The risk for CTOs focused on how well websites work is they may find the digital transformation within their organisations turns out to be the greater challenge.
Indeed it may well be the whole concept of Chief Transformation, or Digital, Officers is flawed as digital transformation is pervasive; it affects all aspect of business through HR and procurement to management itself.
Passing the buck
The great risk for organisations appointing a CTO or CDO is that other c-level executives may then believe those individuals are responsible for the effects of digital transformation on their divisions.
While Chief Digital, or Transformation, Officers can have an important role in keeping an organisation’s board or a government aware of the opportunities and challenges in a rapidly changing world, they can’t assume the responsibilities of adapting diverse businesses or government agencies to a digital economy.
Done well with proper resources and management buy in, a good CTO could genuinely transform a business and be a catalyst for change.
Regardless of the responsibilities a CTO or CDO assumes within an organisation, for the role to be effective the position needs the full support of senior management and adequate resources.
If a company or government wants to pay more than lip service to digital transformation then a poorly resourced figurehead is needed to drive change.
Stack ranking claims another corporate victim with Merissa Mayer at Yahoo!
One of the clumsiest management tools deployed by modern executives is stack ranking, the practice of putting staff members on a scale where the bottom 20% miss out on bonuses and, in bad times, are the first to be fired.
The process has terrible effects upon the morale of workplaces as it rewards political manoeuvring over effective performance; the worker who focuses on their task and the business tends to be overlooked compared to those who curry favour with the boss.
Another debilitating effect is it destroys teams as it has the perverse effect of discouraging people joining teams with high flying colleagues as it increases one’s chances of receiving a poor rating.
That Mayer has made the same mistakes at Yahoo! is a disappointment; there were so many high hopes for her in reinvigorating the troubled company. Indeed carrying out the stack ranking process every quarter seems particularly debilitating and management intensive, it’s hard to think of a more effective way of destroying morale and distracting management.
In some situations Stack Ranking can be effective but the way companies like Yahoo!, HP and Microsoft have implemented the method, it’s proven to be the wrong tool for the job of managing high skilled workforces.
When implementing clumsy management tools like stack ranking, it’s worthwhile considering whether it’s the right tool for the job.
That’s a bit of stretch as Uber’s simply an application of the technologies that are changing business and the economy; those technologies are having a more profound effect on the role of managers in the modern workplace.
Along with services like AirBnB and Task Rabbit, are the result of the new breed of cloud, mobile and big data tools that make it easier to deploy new business models which in themselves threaten traditional industries and their executives.
Uber’s success is in finding an industry that in much of the world has been ripe for disruption for decades; in most Western cities cab services have been regulated to protect plate holders’ incomes and often to protect corrupt local cartels.
What Uber’s disruption shows is how those tools can be deployed against cosy incumbents.
Probably the cosiest group of incumbents of all have been corporate managers; over the last thirty years businesses have been downsized, workers have become more productive and many functions have been outsourced or offshored.
Management however has largely remained untouched as the need to supervise business functions has remained.
Now those tools – particularly the smart algorithms that run companies like Google, Facebook and Uber – are coming for managers in many industries. Added to the manager’s dilemma are improved collaboration tools that allow workers and machines to communicate and make decision autonomously without the need for supervision.
Possibly the greatest change in business over the next decade will be the disappearance of the manager as software takes over.
Kalanick flags the Asia Pacific as being the focus for the company with the latest fund raising which values the business as currently being worth over forty billion dollars.
That valuation is a massive achievement for a five year old business, with the growth pains involved being one highlighted in Kalanick’s post.
This kind of growth has also come with significant growing pains. The events of the recent weeks have shown us that we also need to invest in internal growth and change. Acknowledging mistakes and learning from them are the first steps. We are collaborating across the company and seeking counsel from those who have gone through similar challenges to allow us to refine and change where needed.
One of the big challenges for a high growth business is managing that growth; systems that work well for a ten person organisation with a few hundred clients fall over when you have a hundred staff, thousands of contractors and millions of customers.
Probably the biggest challenge for businesses like Uber is privacy; what’s clear is the ‘God View’ that allowed the company’s staff to monitor customers and drivers has been abused and is too easily accessed by employees. Tightening data security is going to be one of the major tasks for business.
Fortunately, taking swift action is where Uber shines, and we will be making changes in the months ahead. Done right, it will lead to a smarter and more humble company that sets new standards in data privacy, gives back more to the cities we serve and defines and refines our company culture effectively.
‘Giving more back to cities’ flags what could be a new strategy for growth in places where regulators and governments have been hostile to Uber. One of the reasons for Uber’s success in Sydney for example has been the utter disgust the general population and business community has for the local taxi companies, showing Uber as a good corporate citizen could help in more hostile European markets.
While Kalanick identifies the Asia Pacific as being the big growth market he doesn’t identify in what fields; it’s hard not to think Uber’s software has more potential in logistics than hire car dispatch and this is an area where the company could find more opportunities to expand the company’s services.
Regardless of the direction Kalanick decides to take Uber, the company is cashed up and ready to expand. As long as management keeps the confidence of investors, the business’ fate is in it’s own hands.
Uber is probably the most fascinating and complex of this generation of tech startups, Kalanick’s post shows it’s story has a long way to play out.
Uber’s missteps remind us that ethics matter in business
At this week’s Australian Gartner Symposium ethics was one of the key issues flagged for CIOs and IT workers; as technology becomes more pervasive and instrusive, managers are going to have to deal with a myriad of questions about what is the moral course of action.
So far the news isn’t good for the tech industry with many businesses failing to deal with the masses of data they are accumulating on users, suppliers and competitors.
A failure of transparency
One case in point is that of online ride service, Uber. One of Uber’s supposed strengths is its accountability and transparancy; the service can track passengers and drivers through their journey which should, in theory, make the trip safer for everybody.
In reality the tracking doesn’t do a great job of protecting riders and drivers, mainly because Uber has Silicon Valley’s Soviet attitude to customer service. That tracking also creates an ethical issue for the company’s management and one that isn’t being dealt with well.
Compounding Uber’s ethical problem is the attitude of its managers, when a Senior Vice President suggests smearing a journalist who writes critical stories then its clear the company has a problem and the question for users has to be ‘can we trust these people with our personal data?’
With Uber we may be seeing the first company where data management and misuse results in senior management, and possibly the founder, falling on their sword.
Journalists’ ethics
Another aspect of the latest Uber story is the question of journalistic ethics; indeed the apologists for Uber counter that because some journalists are corrupt that justifies underhand tactics from companies subject to critical articles.
That argument is deeply flawed with little merit and tells us more about the people making it than any journalist’s ethical compass, however there is a discussion to be had about the behaviour of many reporters.
As someone who regularly receives corporate largess — I attended the Gartner Symposium as a guest of BlackBerry and will be going to an Acer event tomorrow night — this is something I regularly grapple with; my answer (or rationalisation) is that I disclose that largess and let the reader make up their own mind.
However one thing is clear at these events; everything is on the record unless explicitly stated by the other party. This makes Michael Wolff’s criticism of Ben Smith’s original Uber story in Buzz Feed pretty hollow and gives us many pointers on Wolff’s own moral compass as he invites other writers to ‘privileged’ dinners where the default attitude is that everything is off the record.
Playing an insider game
Ultimately we’re seeing an insider game being played, where journalists like Wolff put their own egos above their job of telling their audience what is happening; Jay Rosen highlighted this problem with political coverage but in many respects it’s worse in tech, business and startup journalism.
It’s not surprising when a game is being played by insiders that they take offense at outsiders criticizing them.
Once the customers become outsiders though, the game is drawing to an end. That’s the fate Uber, and much of the tech industry, desperately want to avoid.
Uber in particular has many powerful enemies around the world and clumsy management mis-steps only play into the hands of those who see the company as a threat to their cosy cartels. It would be a shame if Uber’s disruption of the many dysfunctional taxi markets was derailed due to the company’s paranoia and arrogance.
Eventually ethics matter. It’s something that both the insular tech industry and those who write on it should remind themselves.
Innovating within a business can be hard work says Brian Solis
“Technology is part of the solution, but it’s also part of the problem,” says Brian Solis, the
Brian Solis describes himself as a digital anthropologist who looks for how businesses are being disrupted. We talk about digital darwinism, how businesses can approach change and the role of individual changemakers within organisations.
“My primary responsibility is to study disruptive technology and its impacts on business,” says Solis. “I look at emerging technology and try to determine which one is going to become disruptive.”
To identify what technologies are likely to disrupt businesses it’s necessary to understand the human factors, Solis believes.
One of the problems Solis sees is the magnitude of change required within organisations and particularly the load this puts on individuals, citing the story of one pharmaceutical worker who tried to change her employer.
“Her mistake was thinking this was a short race, she thought everyone could see the opportunity inherent in innovation and change when in fact it was a marathon. She burned herself out”
“What that means is to bring about change you really have to dig yourself in because you’re ready to do your part. You can’t do it alone, you have to do change in small portions and win over the right people.”
GE CEO Jeff Immelt sees a different world of investing and business in coming years where growth is slower
Today GE had their At Work conference in Sydney where CEO Jeff Immelt was interviewed by Westfarmers’ boss Richard Goyder.
One of the key messages from Immelt in his interview with the Australian conglomerate’s CEO was that finding growth in a flat global economy is going to take hard work and creativity; just relying on increased domestic spending is not longer an option.
Immelt was particularly pointed about the developed world’s economies, “the US is best since the financial crisis, growth is broad based but it’s still in the two to two-and-a-half percent range. It may be that’s the new normal.”
“Europe and Japan are pretty tough, forty percent of the world’s economy is still difficult, not going downward but stable and flat.”
Preparing for a slow growth world
“We’ve prepared ourselves for a slow growth world but one where you can invest in growth.”
“There’s still opportunities out there,” Immelt observed. “We’re going to have to make our own growth.”
Part of that growth story relates to the end of the consumerist era where debt funded consumer spending, particularly in the US, drove the global economy.
“We are coming out of a time period of the last ten or fifteen years where the US grew four and half percent every year with no inflation. So the US was the dominant economy in the world during the 1980s and 1990s.”
“We knew that was not going to be the same, so we’re in a world with no tail wind where we think greater focus on things like R&D, globalisation and things like that which will be critically important.”
Changing business focus
One of things Immelt did after the global financial crisis was to change the focus of the business away from the consumer finance division that had been a river of gold over the last thirty years back to being an industrial infrastructure company.
“Everyone needs to paranoid about relevancy and what they do great in the world today. There is no shelf life for reputation or anything else.”
“The engine of growth in the US when it was growing at its best was the US consumer, both in the combination of their own wealth and in taking on leverage. That was the engine of growth from 1980 to 2007.”
“It ended badly, but those were big engines of growth. What will be the next engines of growth?” Immelt mused.
Asian consumers to the rescue
Immelt sees the rise of Asian economies as being the next growth drivers with over billion consumers rising in affluence.
Whether those Asian economies can generate the growth that the hyper-developed economies of North America, Europe and Japan were able to provide during the past thirty years remains to be seen given China’s, and most of Asia’s, consumers having nothing like the West’s spending power.
The truth is we’re decades off Asia’s huddled masses having the economic strength to carry the global economy in the way the western world’s consumers did for the closing decades of the Twentieth Century.
For economies like Australia that are largely based upon domestic consumption funded by debt, this will mean a massive redirection of the economy away from renovating houses to investing in productive industries.
Immelt’s message to business leaders is clear; don’t rely on a rising tide of domestic growth to keep you afloat. Companies are going to have to find new markets and products if they want to grow, waiting for customers to arrive is no longer an option.
Keeping things simple is a strength in today’s complex times.
This week I’m in New York to attend the BlackBerry Security Summit, more of which I’ll write about later although this story for Technology Spectator covers much of the news from the day.
BlackBerry is struggling to find relevance after losing its way when Apple and Android smashed their business model of providing secure, reliable and email friendly phones.
Now in post Snowden world, BlackBerry under new CEO John Chen is looking to rebuild the company’s fortunes on its strengths in security.
One of the aspects Chen’s team is emphasising is the simplicity of their software. Dan Dodge, who heads BlackBerry’s QNX embedded devices division says their operating system has a 100,000 lines of code as opposed to hundreds of millions in Windows and Android.
That weakness in the established software packages is something illustrated in today’s story about a verification problem in Android due to reuse of old code from another older product.
Simplicity is strength is Dodge’s message and that idea could probably be applied to more than software.
In the complex times we live in, simplicity could be the key to success.
