Tag: business

Beating Facebook envy

Being behind the cutting edge could be a benefit for a business or nation suggests one software executive

Do economies and businesses need to be at the cutting edge of tech or is staying behind the early adopters the key to get the most out of technology?

“Everybody has Facebook envy,” says Oracle’s Neil Mendelson, the company’s Vice President for Big Data, about business life in Silicon Valley.

Mendelson was talking about how the Silicon Valley business environment is a high pressure bubble where the focus on shipping products is different from the needs of users outside the tech sector.

“The farther out you go from Silicon Valley the more people fundamentally understand the value is in getting something out of it,” says Mendelson who was speaking at an executive lunch in Sydney earlier today.

“Being a late follower has an advantage because companies aren’t going to get fired up about this Facebook envy trying to assemble a solution but rather they can get something out of the cloud that will deliver value.”

The Minitel problem

An example of being too far ahead could be Minitel, a text based network operating across France between 1982 and 2012.

Minitel was a visionary project intended to deliver services similar to the Internet through a dedicated terminal, however the open nature of the net made the French service less than attractive and eventually France Telecom wound the service up in 2012 as user interest evaporated.

How much the French bet on Minitel held the nation’s digital economy back is open to question, the World Economic Forum lists France as 25th in the world in its 2014 Networked Readiness Index however the gap between most of the top nations is quite close.

Falling off the bleeding edge

The idea that the best return on a tech investment is by being behind the ‘bleeding edge’ isn’t new, for years the advice from serious computer experts was to never buy a Microsoft product until version three came out however there is a risk that the early adopters might get an early advantage over the slow movers.

Another risk is missing out altogether; as Oracle’s Australian manager Tim Endrick told the room, “our experience is organisations are doing two things; they are either managing disruption and/or they are leveraging their structures to innovate. Those who are sitting on the back step doing nothing are in serious trouble.”

So while there are risks with being too an early an adopter of new technology, it’s important to be aware of the trends and tools that are changing business.

With the pace of change in both technology and industry accelerating, it may be that staying too far behind the cutting edge risk falling off altogether. Maybe it’s worth being envious of Facebook.

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Are brands doomed?

Are brands dying in the face of informed consumers and emerging market indifference?

A few days ago we covered the Great Transition research paper by Colonial First State Funds Management’s James White and Stephen Halmarick and followed up with a piece in Business Spectator looking at the ramifications for the Australian economy.

One of Halmarick and White’s assertions is that brands are dead as consumers in emerging economies don’t care about corporate names and in developed nations people have better information about local businesses.

The former argument seems flawed from the beginning; Apple for example is making huge inroads in China while local manufacturers like Lenovo, Huawei, Great Wall and Haier are all working hard to establish their names in international markets.

In developed markets, White and Halmarick’s views have more basis with brand names not having the cachet they once did now consumers have a global platform to voice complaints and find alternatives.

A good example of brands that are struggling are companies like Microsoft and McDonalds, although in the case of both companies this could be more because of a shift in the marketplace rather than better informed consumers.

However brands are surviving as they lift their game and adapt to changed marketplaces, in fact its possible to argue that today’s consumers are more responsive to brand names than ever in the past.

A good example of this is again Apple which has more fans than ever before. Apple are also a good example of how big corporations can invest huge amounts into new technologies and products to give them an advantage over upstarts.

We should also remember that brands as we currently know them are largely a Twentieth Century phenomenon born out of the development of mass media communications and many of today’s household names came into the culture thanks to television in the 1950s and 60s.

So as creatures of last century’s media it’s not surprising that brands are having to evolve to a changed world, some of them will thrive and grow while others will shrivel away.

It’s safe to say though that the concept of brands isn’t dead, although many of the names we know today may not exist by the end of the decade.

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Managing the great transition

How can countries manage the great economic transition?

At present the global economy is beset with low expectations; trade is at its lowest point in 20 years, many of the worlds economies are teetering on the edge of depression and investment is barely keeping ahead of depreciation.

The world is slowing and The Great Transition report by Colonial First State Global Asset Management looks at the reasons and some of the effects of this change.

Senior economic and market research analyst James White suggests in the report that the current state of affairs is a permanent shift as global productivity rises due to Chinese production and the widespread digitisation of most industries.

Compounding the problem in White’s view is the traditional measures of economic growth understates the size of the service economy as between ten and twenty percent of transactions go through the ‘black economy’ in most countries.

In looking at their own field, the Colonial First State researchers suggest that investment strategies are going to change as ‘capital light’ industries begin to dominate advanced economies.

While White and his co-author Stephen Halmarick are optimistic about what the changes mean and suggest a focus on people and attracting global capital as the key to competing during the Great Transition, the challenge is on policy makers to increase human capital in their economies.

The question though is what can individual countries do to be competitive in this context? While nations like Switzerland and Singapore can quickly develop pro-investment policies, it’s harder for larger and more diverse societies.

Perhaps the services driven economic model is really only one for high wealth, small nations with well trained and skilled workforces? If that’s the case, then the Great Transition might be a tough time for many of the world’s developed economies.

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Data driven lending

Square enters the small business lending space, will be they successful in a very competitive field?

Banking has always been a data driven business, understanding borrowers and the risks they present is one of the essential skills in making money from lending.

The new wave of payment startups present a new way for lenders to analyse risks; with real time data aggregated across businesses and regions, lenders can quickly decide wether a borrower is likely to able to pay the money back with the conditions asked for.

Payments company Square in its latest pivot has partnered with Victory Park Capital and claims to have extended more than $100 million in capital to more than 20,000 merchants writes the New York Times.

Like other payment companies that have entered this market, Square uses their own deep understanding of their customers’ incomes to be able to make a data based decision on the creditworthiness of applicants.

Square also offers ancillary data-driven products created for small businesses. The new instant deposit product, which is still in testing and will be fully available in the spring, will give businesses faster access to money they put into a debit account. And the company’s new charge-back protection service will cover some disputes between consumers and merchants.

Those products also rely on data that Square has collected. They will be available only to small businesses that have a solid financial track record, based on a history of accepting payments with Square.

Square is by no means the first business to do this, last year we wrote of PayPal’s move into small business lending and Point of Sale hardware manufacturer Verifone retreated from the market two years ago calling it ‘fundamentally unprofitable.’

The competition in the space and the fact assessing financial risks isn’t exactly a core competence of Silicon Valley start ups indicate Square’s and other companies may find small business lending a tough business as well.

Despite that, small business lending is a field that is overdue for disruption. With companies like Apple, Google and Amazon all offering payment services, the logical expansion is into evaluating risk and profit.

It may not be Square, Verifone or PayPal who ultimately redefines the sector, but it will be one of today’s tech businesses that does.

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Why being a unicorn could be a bad thing

Most businesses don’t need big VC type investors to help them grow

Andrew Wilkinson doesn’t want to be a unicorn. In Why I want to be In-N-Out Burger, not McDonalds, Wilkinson describes how he’d rather his business is a sleek racehorse rather than a beautiful, mythical creature.

One of the misunderstandings in the current startup mania is the motivation of founders and proprietors; many haven’t gone into business with the aim of flipping the company to a rich sugar daddy for a billion dollars.

In his great presentation “Fuck You, Pay Me” – essential viewing for anyone starting a business – San Francisco designer Mike Montiero describes “We wanted to pick and choose the clients we were gonna work with and we wanted to be responsible for what we’re putting out in the world.”

For businesses like Montiero’s and Wilkinson, having a venture capital investor looking over their shoulder would be as bad as working for a corporation; ceding control of your work is exactly the reason they started their businesses in the first place.

While the Silicon Valley venture capital model is valid for high growth businesses that need capital to scale quickly, most ventures don’t need those sort of large cash injections early in their development – for many, a million dollar cheque from a VC could prove to be a disaster.

There’s myriad reasons why someone starts a venture and all of them pre-date the current startup mania, it’s why every business is different in its own way.

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Closing the video store

The rise and fall of the video rental industry is a cautionary tale of how yesterday’s hot new industry can become a dinosaur within a couple of decades.

The last video store in my neighbourhood is closing down. A few years ago there were six in the suburb.

Last year the US Blockbuster chain closed down its disk rental business and now the same thing is happening in Australia as people move from playing DVDs to streaming or downloading from the internet.

In a generation the video rental industry went from nothing to boom to nothing again; a classic case of a transition effect.

The rise and fall of the video rental industry is a cautionary tale of how yesterday’s hot new industry can become a dinosaur within a couple of decades.

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Technology’s crisis of trust

Last night for the monthly ABC Nightlife tech spot we looked at Samsung’s spying TVs and some of the other aspects of security with connected devices.

During the listeners’ calls it became very clear many are worried and scared by technology’s rapid progress. This is a challenge for the leaders of both the tech industry and governments.

Trust in the tech industry isn’t being helped by the revelation Lenovo computers have been loaded with Adware that, among other things, interferes with secure website connections.

Lenovo’s actions raise a serious concern for business as many of those home units may have been connected to office networks under corporate Bring Your Own Device policies and the spoofing of security certificates could cause no end of problems and risks for IT managers.

Another concern Lenovo’s actions raise is about the Internet of Things; if various devices on a network are messing with data integrity, confidence in the information being generated is eroded.

For the tech industry, it’s essential to regain the community’s trust. Equally however it’s essential for business and political leaders to have an honest conversation with voters and workers on how the structure of the workforce is changing.

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