Paul Wallbank – Brilliant Communications

Tag: business

  • Synergies aren’t easy money

    Synergies aren’t easy money

    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.

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  • Software’s modern loom weavers

    Software’s modern loom weavers

    Are we coming to the end of the hand crafted era of software development? Pegasystem’s Alan Trefler thinks so.

    “Technology has completely dis-served the modern economy;” Alan Trefler, the founder and CEO of software vendor Pega Systems, told the audience at the opening of his company’s new office in Sydney yesterday.

    Trefler sees there being an ‘execution gap’ between what software promises and actually delivers; that development is too slow and programs don’t give users what they need.

    Ending the hand crafted software era

    A key reason for this in Trefler’s view is that too much software is ‘hand crafted’ and that his company’s object orientated methods speeds up development time and delivers a better product.

    This may well be true, Pegasoftware’s client list is impressive, however moving from the age of ‘hand crafted software’ may well spell the end of many IT industry worker’s careers.

    One of Pegasystem’s key Australian customers is the Commonwealth Bank and the company’s CIO, Michael Harte, gave some comments at the opening that illustrated how the software industry is changing.

    Freeing up resources

    “Does an IT organisation want to change fast enough to adopt a new model driven approach so they can free up capital and free up resources?” Harte asked.

    That freeing up resources and capital is exactly what befell the Luddites when the 18th Century mill owners decided to change the technology they used.

    For modern IT workers, the last decade has been tough as a whole generation of business analysts, software engineers and project managers have found the enterprise computing industry has been offshored and automated; Harte and Trefler are describing how that process is by no means over.

    “Older project models necessitated people to build a use case and then to design something, go through requirements and start crafting software, that’s on old idea,” says Harte who sees a model orientated approach as being more effective for modern enterprises.

    Let the machines do the grunt work

    That’s not to say that either men are pessimistic about the future of the software industry; both see an improved industry delivering better results for business.

    “Let’s move people into higher order things and allow the machines to do the grunt work,” Harte urges.

    “Not that long ago when I was learning how to do this stuff we’d have to fill in punch cards and then fill in Word Documents to write out technical requirement, that’s not much fun.”

    “Lets have some fun and get some work done.”

    Harte is describing a very different IT industry and workplace, one that doesn’t need older skills and – more importantly – doesn’t need as many clerks or middle managers carrying out routine administrative tasks.

    It should be noted that both Harte and Trefler were adamant that their visions did not mean job losses when asked by this writer about the employment consequences, but it’s impossible not to come to the conclusion that a fundamental industry change means many skill sets become redundant – again this is what happened to the Luddites in the 18th Century fabric mills.

    “What we think the next ten years are going to be about is changing those metaphors,” says Trefler. “There can be a more highly evolved communication between IT and business folk.”

    Both Trefler and Harte see design as the future of software with most of the human work being in creating the interfaces that work for the people using the computers, this is where the high level, high value work is to be done.

    The changes that Pegasystems are describing is not just an IT industry issue; these are changes that are happening across the workforce and in all sectors. For both managers and workers, it’s a time to refresh skillsets and understand where the value lies in what they do.

    Many industries have products handmade by skilled tradesfolk become a thing of the past, it now appears the time has come for the IT industry’s craftsmen and women.

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  • You can’t cost cut your way to growth

    You can’t cost cut your way to growth

    Yesterday I interviewed Alex Bard, Senior Vice President for Service Cloud at Salesforce for the Decoding The New Economy YouTube channel.

    Alex’s interview will be up tomorrow, but during the conversation afterwards he made a comment about modern management saying, “you can’t cost cut your way to growth.”

    This is at odds with 1980s management theory where CEOs like Jack Welsh at GE and Al ‘Chainsaw’ Dunlap at Scott Paper slashed costs to bring listless businesses back into profit.

    During that period, many businesses were overstaffed and poorly managed so leaders like Welsh and Dunlap were the right men for their time.

    To a generation of bean counting executives, Dunlap and Welsh proved that any business problem could be fixed by cutting costs. They were truly men of their times.

    Which brings us to Australia’s Qantas Airlines who, at the time Alex Bard and I were having coffee, announced 5,000 job cuts; close to 25% of the company’s workforce.

    Qantas certainly does have problems as shown in its $252 million loss and some of them, as with all legacy national carriers, lie with long outdated labour arrangements.

    However the airline’s problems are much deeper than a featherbedded workforce and most of the blame for Qantas’ dilemma lies with the company’s management.

    Management mistakes have included maintaining an old fleet of Boeing 767s and 747s while pouring investment into their discount subsidiary, disastrous international alliances in Asia that have seen them kicked out of Vietnam and planes for their Japanese venture grounded in Europe.

    Probably the biggest mistake though for Qantas though was management’s assumption it had a cosy position in its domestic market.

    Like most Australian industries, the nation’s aviation sector is a duopoly dominated by Qantas, a result of the 1980s theory that the country could sustain global champions subsidised by hapless domestic consumers.

    This theory has proved disastrously wrong for Australian consumers with the duopolies becoming very good at exploiting their domestic market power after deciding it was simply to hard to compete outside the home country.

    For Australia, the consequence of this strategic mistake by the country’s business and political leaders has been to make domestic industries hopelessly uncompetitive as local managers are largely isolated from genuine competitive pressures.

    Qantas is the classic case study of Australia’s insular corporate mentality as the airline steadily abandoned its international routes and focused on maximising profits on its domestic operations, particularly those unfortunate rural routes where the Flying Kangaroo has no competition.

    Unfortunately for Qantas’ shareholders; Virgin Australia, the other duopoly player in the Australian airline industry, wasn’t going to play by the rules that keeps the rest of the country’s complacent corporate sector relaxed and comfortable.

    As a consequence, Qantas found itself in a damaging price war as it sought to protect its 65% domestic market share. Worse still for the airline, its competitor started offering Business Class services and competitive lounge facilities that started to erode its most lucrative fares.

    For Qantas, the sensible option is to focus on its strengths and build in its most profitable areas but instead the airline’s CEO, Alan Joyce, chooses to fight for the airline’s precious two third market share while slashing staff numbers.

    Alan’s response is classic ‘cutting for growth’ and it won’t work – the airline desperately needs investment and visionary management, both of which it won’t get.

    Cosy management can prosper in a cosy market, but it leaves those companies exposed to disruption from keener competitors and that’s what Qantas is learning.

    Sadly for Qantas’ management, they aren’t in the 1980s and Joyce is no Jack Welsh. Today, as Alex Bard points out, the game is customer service and slashing your workforce is the wrong starting point.

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  • An era of exponential innovation

    An era of exponential innovation

    “How do we move to an exponential approach to innovation” asks John Hagel, Director of Deloitte’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

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  • The taxing business of options

    The taxing business of options

    I’m burning the midnight oil tonight pulling together a story for Business Spectator on reforming Australia’s tax treatment of employee option schemes.

    This is a fraught subject as Australia bucked the global trend in 2009 after it became obvious the corporate sector was abusing the existing tax rules that were largely in line with most OECD nations.

    In a clumsy, poorly thought out reaction – which is sadly the mark of modern Australian governments of all shades –  the then Rudd Labor government radically changed the rules governing employee schemes that made it difficult for any business to offer stock to their staff.

    Last week I spoke to Sydney business intelligence company Encompass and after the video the founders told me about the importance of their share scheme, it illustrated exactly the problem facing Australian startups.

    Five years on and it’s apparent the strict rules are working against Australian business and various industry associations, accounting groups and startups are lobbying for reform.

    One of the lobbying initiatives is Deloitte’s Retaining Talent project that has some fairly modest proposals in bringing fairer rules back for smaller and younger startups.

    The story’s particularly interesting for me in that I’m bringing together a number of previous posts citing how other countries and cities like San Francisco and the United Kingdom have changed their rules on option schemes.

    For Australia, the closure of the country’s car manufacturing industry and the struggles of the agricultural sector are bringing home to voters and the government just how seriously the country squandered the massive mining boom of the last decade.

    While reforming startup option schemes is a useful start, it’s hard not to think it’s way too little and way too late for the country to begin planning for the post mining boom economy.

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