innovation | Paul Wallbank - Communications Professional

How much did Vista really cost Microsoft?

Microsoft Vista’s failure hurts Microsoft today.

Microsoft Vista was the company’s despised stepchild – released way past schedule, clunky, slow and disdained so much by the market that PC manufacturers started offering “downgrades” to Windows XP to attract customers.

Despite the embarrassment, Microsoft retained its position as the world’s leading software company and does so today. But Vista certainly did hurt Microsoft and today’s marketplace shows the deep, long term effects of that damage.

Research website Asymco earlier this week looked at the ratio of Windows PCs sold to the sales of Apple Macs over the last 30 years. The ratio peaked at 56 to 1 in 2004.

Today that ratio is 18 and when phone and tablet sales are added in, the ratio is approaching 1:1. Apple has caught up.

It’s no accident 2004 is the peak of the Windows-Apple ratio. In 2004 Windows XP had matured after three years on the market, the older computers running Windows 98 or ME (another hated operating system) were being retired and a new version of Windows – codenamed Longhorn – taking advantage of newer technologies and with improved security was due to be released.

On August 27, 2004 things started to change with Microsoft’s announcement Longhorn would be delayed two years. This effectively broke the product roadmap that underpinned the business models of Microsoft and their partners.

To make matters worse, Apple were back in the game with their OSX operating system well established and a steady stream of well designed new products coming onto the market.

For consumers and businesses one of the advantages Windows systems had over Apple was the cost difference. The “Apple Tax” started to be eroded by the company’s move to Intel CPUs which delivered economies of scale coupled an aggressive program of tying up the supply chain with key manufacturers.

Then Longhorn – now known as Microsoft Vista – was released.

Despite the cheerleading of the Microsoft friendly parts of the technology media, consumers weren’t fooled. The product was slow and buggy with a new interface that confused users. Making matters worse was Microsoft’s ongoing obsession with multiple versions offering different features, something mocked by Steve Jobs, which further confused the marketplace.

Vista languished, customers decided to stick with Windows XP or to look at the faster and better designed Apple computers, and Microsoft’s market share started to slowly erode.

By the time Windows 7 was released Apple had clawed back their market position, launched the iPhone and caught the shift from personal computers to smartphones.

Probably the biggest embarrassment of all to Microsoft was the launch of the iPad, the market had been gagging for good tablet computer since the late 1990s and Microsoft’s partners had failed to deliver, partly because Windows XP, Vista and 7 didn’t perform as well as Apple’s iOS on the tablet form factor.

Microsoft’s completely blowing a decade’s lead in the tablet market is almost certainly due to the misguided priorities and feature creep that dogged Vista’s development. This is now costing the company dearly.

Asymco’s conclusion of Microsoft’s new market position is stunning and accurate.

The consequences are dire for Microsoft. The wiping out of any platform advantage around Windows will render it vulnerable to direct competition. This is not something it had to worry about before. Windows will have to compete not only for users, but for developer talent, investment by enterprises and the implicit goodwill it has had for more than a decade.

It will, most importantly, have a psychological effect. Realizing that Windows is not a hegemony will unleash market forces that nobody can predict.

Vista’s cost to Microsoft was great, it meant the company missed the smartphone surge, the rise of tablets and – possibly most dangerous of all to Microsoft – the move to cloud computing.

A lot hangs on Microsoft’s next operating system, Windows 8. Another Vista could kill the company.

Can Sydney become a smart city?

What are the challenges facing building a down under entrepreneurial culture?

How does a city become smart? That seems to be the question of the moment as countries and cities around the world try to figure out how to catch a little bit of Silicon Valley’s magic.

As part of the 2012 City Talks series, the City of Sydney hosted a discussion on how the city can become a smart city;

Sydney is bursting with talented, creative and forward-thinking people. How can we harness the energy of government, education, businesses, media, and creative thinkers to create space for innovation?

While it’s questionable that a “creative space for innovation” is a worthy objective – albeit laden with buzzwords – it’s certainly true that Sydney, along with other Australian cities, has the components to be a entrepreneurial centre, the question is how does the city harness the various talents across the different sector.

Working to advantages

Rather than aping Silicon Valley, New York or Ireland all cities should be exploiting their natural advantages. Fast Company Magazine recently looked at how Oklahoma City has advantages over its bigger cousins in New York and California.

For Sydney, and Melbourne, those strengths include an educated, multi-cultural workforce with first world legal systems in a similar time zone to the world’s major growth markets.

One of the tragedies in Australia’s marketing over the last twenty five years has been the failure to mention the ethnic diversity of the nation. This is huge competitive advantage that is barely being discussed.

What can governments do?

At the Sydney City Talks event, Lord Mayor Clover Moore said that creating a smart city requires “the same incentive to be given to innovators and creatives as is given to property investors and mining companies.”

That change requires state and Federal governments to change laws and businesses, particularly banks, to pick up on those price and policy signals.

Education too needs reform although this needs real consultation or we’ll end falling for short term fads or copying the damaging anti-teacher jihad that has infected the US.

A welcome change for many Australian innovators would be changes in government procurement policies as currently all levels of government prefer to deal with the local offices of large multinationals. As the Queensland Health Department debacle shows, these organisations are often less competent than local providers.

Making those changes though will require major reforms to policies and laws, something that neither major Australian political party at any level has the courage or vision to do.

That the NSW Digital Action Plan is now in its thirty-first draft speaks volumes about the inertia among the city’s, state’s and country’s political and business leaders.

Ditch the Silicon

Probably the first failure of imagination is the “silicon” tag – US entrepreneur Brad Feld skewers this nicely in his blog post on The Tragedy Of Calling Things Silicon.

Sydney has already has a group called “Silicon Beach” which has spread out to Melbourne and the Gold Coast and it’s interesting that both Google Australia’s CEO and Engineering head want to co-opt the name.

On of the suggestions was “Silicon Banana” a tag which brings to mind the phrase “kill me now please?” to anyone already uncomfortable with the ‘Silicon’ label.

The “Silicon Banana” idea comes from the curved shape of Sydney’s ‘digital heartland’ which curves from Darling Island to the west of the city and curves around the edge of the city centre through Surry Hills across to the film and television facilities at Fox Studios.

Describing Sydney’s centre of innovation as lying within the ‘banana’ illustrates the lack of thinking outside the current app and web mania. It also neglects the bulk of Sydney, particularly those parts of the Western Suburbs where languages such as Mandarin, Cantonese, Korean, Vietnamese, Arabic or Hindi are spoken.

Once again we neglect those assets because they aren’t white, Anglo or living in the prettier parts of the city.

Does it have to be Sydney?

We should keep in mind that the Silicon Valleys of the past haven’t been the biggest cities – Silicon Valley itself is barely a city and San Francisco is not one of the US’ biggest cities.

It’s quite possible that an Australian centre of innovation could be any one of dozens of smaller towns such as Geelong, Wagga or Cairns.

The problem in Australia is, once again, property prices. Compared to the US or Europe, housing and office rents aren’t substantially cheaper outside the big cities unless you’re prepared to move to seriously blighted parts of the country.

Spinning the wheels

Probably the most disappointing thing of the ‘smart city’ discussion is just how bogged down we’ve become – there was little in the City Talk that wasn’t being spoken about five, or even ten, years ago. Things have not moved on.

Creating a smart city isn’t about picking winners among industries, suburbs or groups. To really be smart we have to give the opportunities for clever people to succeed.

Simply jumping onto today’s technology fad or mindlessly aping Silicon Valley is to squander our advantages and not learn from the mistakes of others.

The real worry though is just how little progress is being made in seizing today’s opportunities. It doesn’t bode well for tomorrow’s.

Disrupting the markets

Mary Meeker’s All Things D tech industry presentation raises some fascinating points.

Generally it’s not a good idea to have nearly a hundred slides in a presentation, but Mary Meeker’s overviews of the tech industry are so rich in data it’s impossible not to spend a weekend looking over the entire sldieshow.

Last week Mary gave her presentation at the All Things Digital conference and as usual she identified a range of trends and issues in the technology industries.

Smartphone upsides

Still the early days of smartphone adoption, with 6 billion mobile phone subscriptions worldwide but only 954 million smartphones activated.

This adoption is driving mobile revenues with income growing at 153% per year. Although as she shows later, this is not necessarily good news for everybody.

Print media’s continued decline

A constant in Mary’s presentations over recent years the key slide in has been ad spend versus usage across various mediums.

In this year’s version we still print still vastly over represented with 25% of US advertising while TV remains static, although Henry Blodget at Business Insider thinks the tipping point might be arriving for broadcasters.

Online’s thin returns

One of the things that really jumps out is how thin onlie revenues really are. In annual terms services like Pandora and Zynga are making between 6 and 25 dollars per active user over a year.

These tiny revenues indicate the problem content creators have in making money on the web, after the gatekeepers like Pandora or Spotify have taken their cut, there isn’t much left to go around.

Facebook and Google are also encountering problems as users move to mobile where revenues are even smaller than those from desktop users. This is constraining both services’ earnings growth.

Disrupting markets and governments

Mary’s presentation goes on to look at the disruption web and mobile technologies are bringing to various markets – it’s a good overview of whats changing right now and the products driving the changes.

It’s not just markets that are being disrupted with Mary also looking the US’s budget position and entitlement culture. This in itself is a massive driver of change which will have a deep effect on our lives regardless of where we live.

Are we in a bubble?

Mary finishes up with a look at whether we’re in a tech bubble or not.

Her view is that we are and we aren’t – there are silly valuations of companies in the private market however the poor performance of tech stocks on the stock market indicate the public aren’t being fooled.

One telling statistic is the only 2% of companies have accounted for nearly all the wealth creation of the 1,720 US tech IPOs between 1980 and 2002. There’s little to indicate much has changed in the decade since.

The optimism in funding new businesses is based in the disruption they are bringing to markets and industries – you only need one eBay or Google in your portfolio and you’re a legend, if not filthy rich.

Both the economic and technological changes are disrupting our own businesses and this is why its worth reading and understanding Mary Meeker’s presentations if only to be prepared for the inevitable changes.

Grappling with the online news beast

Old media organisations are struggling with the web. Is the news industry dead or evolving?

The head of Google News, Richard Gingras, last week discussed how the news industry is evolving at Harvard University’s Nieman Foundation.

Much of Richard’s discussion centred around disruption – the newspaper industry was disrupted in the 1950s by television and by the 1980s most print markets had seen several mastheads reduced to one or two.

The remaining outlets were able to book fat profits from their monopoly or duopoly position in display and classified advertising.

By 2000, the web had killed that business model and the newspaper industry was in a decline that continues today as aggregator sites like Huffington Post steal page views and Google News further changes the distribution model.

One of the problems for the news industry is how different the online mediums are from print, radio or television broadcast. The struggles of media startup The Global Mail is a good example of this.

In the middle of last year news started trickling out that one of the Australian Broadcasting Corporations’s top journalists, Monica Attard, had left the broadcaster to set up The Global Mail, an online news site funded by Wotif founder Graeme Wood.

The site launched on schedule in February 2012 and underwhelmed readers with pedestrian content and a confusing layout. By May, Monica Attard announced she was leaving the organisation she’d founded.

Tim Burrowes of the media site Mumbrella examined why the Global Mail is struggling, his Nine problems stopping The Global Mail from getting an audience details how the site doesn’t use online media effectively.

At heart is a fundamental mismatch between the methods of journalists raised in the “glory days” of print and broadcast journalism against those of the online world, not least the much harsher financial imperatives of those publishing on the web.

One key problem it the TL;DR factor – Too Long; Didn’t Read. Where online readers tend to leave stories after around four hundred words.

Richard Gringas is quoted as encountering this problem when he worked at online magazine, Salon.

At Salon, articles were paginated, but only 27% of readers made it to the end of the four-page articles. Compared to competitors, Richard was told, this was a good benchmark. But with fresh eyes, he was astounded that a product was being produced with the knowledge that the vast majority of the audience would not consume the entire piece. Richard loves the long form, but if the objective is to convey information, we need to think about the right form for the right medium at the right time.

So “long form” journalism has to be written the right way and it has to be backed up with good visual components and have “short form” versions suited to the more impatient readers who make up the bulk of the web audience.

The New York Times made a step in this direction with their iEconomy series on how the US middle classes have been displaced with manufacturing’s move to China.

An even better example of journalists using the web well is The Verge’s Scamworld where an online expose of Internet get rich quick schemes and the conmen behind them.

Scamworld shows us what skilled journalists can do online. The amazing thing is the site’s new steam is tiny compared to those of established outlets like the New York Times, Guardian, Fairfax or those of News Corporation.

This failure to execute by incumbent news organisations isn’t because they are lacking talent – every young, and not so young, journalist has been required to have multimedia skills and the ability to file stories in multiple formats for at least a decade.

Old Media’s problems lies in the mindsets of senior journalists, editors and their managements who are locked into a 1950s way of thinking where fat advertising revenues funded the adventures and expense accounts of roving reporters who tough as nails editors occasionally bullied into filing stories.

That model started to die in the 1980s and the Internet gave it the last rites.

Richard Gringas’ discussion at Harvard shows news and journalism isn’t dead, but it is evolving. Just like many other disrupted industries, the news media has to adapt to a changed world.

Continuing the online payments battle

Mastercard’s PayPass is a direct challenge to Visa and PayPal

Today Mastercard announced their PayPass service, a “digital wallet” that allows consumers to pay through various online channels including the web and their smartphones.

Mastercard’s PayPass is the latest move in the battle to control the online payments industry as consumers move from plastic cards to using their mobile phones and Internet devices.

One of the interesting aspects of PayPass is how it is a direct challenge to PayPal who in turn recently launched their PayPal Here service which threatens incumbent credit card services like Mastercard and Visa along with upstarts like Square.

While its early days yet in the mobile payments space as consumers slowly begin to accept using smartphones and tablet computers to pay for goods and services, its clear the industry incumbents are moving to secure their positions in the market place.

It’s going to be interesting to see how this develops, many merchants will be hoping this competition starts to drive down transaction costs.

Cargo cults and your business

Do you think the government, China or big business is going to save you?

“We need an interest rate cut” thunders the business media.

“Give us GST relief” plea the big retailers.

“China will boom forever” assert the government economists.

“Big corporations will buy us out for a billion dollars” pray the hot new start ups.

“I’ll win the lottery this week” thinks the overworked cleaner.

We’re all waiting for the big saviour that’s going to rescue us, our business or the economy.

It could be a big win, a big client or a big government spending program to rescue us.

Sadly, should we lucky enough for that saviour to arrive, it may not turn out to be all we expected.

There’s many lottery winners who curse their win while many disaffected founders who watch their startup baby fade away neglectful new owners.

For a lumbering department store, tax changes will do little to save them from market changes their managements are incapable of comprehending.

Interest rate cuts are great for business when customers are prepared to take on more debt but in a period where consumers are deleveraging a rates cut will do little to stimulate demand.

The clamour for interest rate cuts are a classic case of 1980s thinking; what worked in 1982, 1992 or 2002 isn’t going to work the same way in 2012.

What’s more, the Zero Interest Rate Policies – ZIRP – of the United States and Japan are a vain attempt to recapitalise zombie banks saddled with overvalued assets rather than an effort to help the wider economy.

China is more complex and there’s no doubt the country and its people are becoming wealthier and there are great opportunities.

The worry is most of what we read today could have been the wishful thinking written about Japan thirty years ago. Lazily selling commodities to the Chinese while they create the real value is not a path to long term prosperity.

In business we have a choice, we can pray for luck or we can make our own luck.

Some choose to join the cargo cult and pray, or demand, that someone else does something. Others get out and do it.

John Frum gravesite image by Tim Ross through Wikimedia Commons

Rivers of gold

Can there be a downside to Google’s massive profits?

Google’s announcement that their revenues have increased by 24% over the last year shows the search engine juggernaut keeps rolling on.

It’s tempting to think that Google is untouchable and that’s certainly how it appears when you’re on track to earn forty billion dollars a year and book close to 40% of that income as profits.

On the same day, Sony announced a massive restructure including with 10,000 redundancies and the company’s CEO, Kazuo Hirai, spoke of a sense of urgency to address the once dominant corporation’s drift into irrelevance.

Twenty years the thought of Sony – one of the world’s innovators in consumer electronics – would be wallowing in the wake of companies like Apple and unknown upstarts like Google was unthinkable.

Fortunes are won and quickly lost in a time of great change and this is something we should keep in mind about Google when we look at their rivers of gold.

“Rivers Of Gold” was a term coined to describe the advertising riches of the newspaper industry in the 1980’s. Google’s online advertising is partly responsible for destroying that business.

Today Google is a search engine business that makes its money from the advertising that deserted print media and went online.

It may be that manufacturing mobile phones, running “identity services” disguised as social media platforms or augmented reality spectacles are the future of Google but right now they it’s search and advertising that pays the bills and books the massive profits.

The challenge for Google is not to lose sight of its current core business while building the future rivers of gold.

If Google’s leaders can’t manage this, then they risk following the newspaper industry that they themselves disrupted.

Why VCs hate Amazon

How cloud computing is changing investment and entire industries

“Venture capital investors hate us” said Dr Werner Vogels, CTO of Amazon.com at the April Sydney FED, “once you needed five million dollars to launch a new technology business, today you need $50,000 and a big box of ramen.”

Dr Vogels was talking about the Amazon Web Services (AWS) platform that underpins many of the cloud computing and social media sites which are redefining how we use computers and the web.

What’s really interesting with the doctor’s comment is it’s only part of the story; for businesses outside the tech sectors –say retailers or service companies – they get cheap or even free access to the cloud computing services running on AWS or its cloud competitors like Windows Azure.

For those businesses, it’s possible to start an idea for nothing but the founder’s time; rather than putting fliers up at the local bus stop or shopping mall an entrepreneur starting an online store or neighbourhood computer repair business now can create a website and all the local search profiles without spending a cent.

Being able to start up a business with little, if any, capital means we’re seeing a new breed of innovators and entrepreneurs entering markets.

At the corporate level, or in the $50 million dollar VC investment field, the opportunities for exploring Big Data without buying big supercomputers is another benefit of the cloud computing services.

Services like ClimateCorp which insures farmers against extreme weather couldn’t have existed a few years ago as the processing power to analyse historical rain and drought data was only available to those with insanely expensive super computers.

Today, the combined power of millions of low powered cheap computers – the definition of cloud computing – delivers the processing grunt of a supercomputer at a fraction of the cost.

Access to cheap computing power means innovations can be bought to market quickly and at a fraction of the cost that was normal a decade ago.

We’re in early days with what the effects of super cheap computing means to most industries, but it is changing industries as diverse as agriculture, banking, logistics and retail quickly.

Cloud computing is giving big business the tools to understand their markets better and small business the ability to grab customers from bigger competitors who are too slow or don’t want to face what their clients really think.

These are the forces that are changing the way business is being done; if you’re in business it’s time to start paying attention.

In reality, Dr Vogels is pulling our legs – the smart VCs aren’t hating Amazon, they are rubbing their hands at the profits that are going to be made in disrupting cosy industries.

I don’t get it

“Getting it” doesn’t guarantee business success

“I don’t get Twitter or Facebook” says the talkback radio caller, “why would you want to tell the world what you’re having for dinner?”

Once upon a time people didn’t get the motor car. There were many good reasons not to – compared to a horse a steam or petrol driven vehicle was expensive, unreliable and restricted in where it could go.

The motor car ended up defining the 20th Century.

Those who didn’t get it – like the stage coach lines and later the railway companies – eventually faded into irrelevance.

Something we should remember though is that many of the entrepreneurs in the early days of the motor car who did “get it” went broke. As did those in earlier times building railways and canals.

“Getting it” is one thing, but it doesn’t guarantee it will make you rich or guarantee your business’ survival.

Building a digital economy

How does a state build new industries?

Yesterday the NSW Government hosted the Sydney leg of their Digital Economy Industry Action Plan forum meetings.

The aim of the action plan, one of a series for targeted industries, is to develop “a vision and strategy for the Digital Economy over the next decade in NSW.”

So how do we build a “digital economy industry” in a country that seems to be hell bent on staking everything on China’s continuing demand for coal and iron ore?

Picking winners

One of the things implicit in forums and plans like this is that the government has identified the ‘digital economy’ as a priority for economic development.

To help identify the opportunities the New South Wales plan breaks the sector into various industries;

Digital content and applications
Information services and analytics
Smart networks and intelligent technologies
Autonomous systems
E-research
ICT service innovation
ICT biomedical innovation
ICT safety and security innovation
Locally developed technologies and applications

The underlying assumption is the state has some sort of natural advantage in these areas or the potential to develop into a leader.

If these are the foundations of a region’s digital industries then we have to understand how they were identified as it’s difficult to build an industry if we don’t know what we can do.

The role of government

An important question is the role of government, an unfortunate thing with bureaucrats and politicians is they sometimes over estimate the influence they have on industry and the economy in general.

In NSW the state government’s role is going to be at best marginal, they can establish policies and offer financial incentives but business needs access to essential skills, finance and infrastructure.

Walking the talk

It’s all very well for governments to proclaim they support local businesses but if they prefer to buy from multinationals – even if the big boys are more expensive and have a less than stellar delivery record – then the domestic industry cannot thrive.

To be fair to governments, this reluctance to buy from local suppliers is shared by Australian corporations and on its own is probably one of the biggest obstacles for innovative companies and entrepreneurs to thrive in Australia.

Until this attitude changes among governments and corporations, it’s difficult to see how local businesses can develop and survive.

Open data

For the digital industries, open data is probably the most important aspects. Unfortunately the current generation of Australian public servants, managers and politicians share an almost Stalinist view about access to taxpayer owned information.

Without making public data accessible so entrepreneurs can develop new applications and existing industries can improve productivity, governments are only giving lip service to building a digital economy.

A good example of this is the expressed desire of successive state and Federal governments to build Sydney as a global financial centre.

To do this, free and open investment information is essential yet company and stock exchange data that is assumed to be public information in the United States and much of Europe or Asia is propitiatory and locked away behind paywalls.

Government and corporate obsessions with controlling information makes it unlikely any Australian state or city can be global centre in the digital economy or the banking sector which the NSW government sees as an other priority sector.

Consistent standards

Another area governments can improve is by having open standards across government agencies so, for instance, land information can be properly matched with health data or public transport details.

Right now policies on data and things like social media or content platforms is fragmented making the cost of government and doing business more expensive and convoluted than it should be.

Promote advantages

One of the weaknesses in Australia’s overseas marketing is the nation is portrayed as a bunch of alcohol swilling beach bums cuddling koalas.

Google Maps founder Lars Rasmussen once said Google’s head office reaction when he suggested establishing a development office in Sydney was “what are you doing to do? Sit on Bondi Beach and drink Fosters?”

A missed opportunity in Australia’s disjointed tourism and investment campaigns is ignoring the nation’s diverse ethnic and skills base. We need more emphasis on the multilingual skills of the state’s workers and less on bikini babes.

Capital Problems

Whenever a group like the forums gather, there’s always complaints about Australian business’ access to capital.

Australia’s taxation, finance and social security system favours speculation on the share and property markets rather than long term investments or taking risks on new business ideas.

Three generations of these policies have a created a population who, understandably, see owning property as the safest way to provide for retirement. The banking system has responded to this and is reluctant to lend for anything not secured by real estate assets.

At the same time we’ve allowed the compulsory superannuation system to be dominated by flaccid ticket clippers who are content to charge working Australians outrageous fees for hugging the stock indexes.

Sadly what should have been a source of capital for innovative businesses largely spends its time lobbying governments for more protection and a bigger cut of workers’ incomes.

The access to capital is a serious problem for Australian business and one that can’t be kicked up the road for ever by Liberal or Labor Federal governments but it isn’t something the states can fix.

Not only do the distorted investment priorities of Australian society damage developing industries, it almost certainly guarantees the dream of making Sydney a global financial centre unattainable.

Education

One of the canards that always pops up at industry development forums is that educators aren’t in touch with employers’ needs.

There’s a certain type of business manager or owner who believes the roles of schools, technical colleges and universities is a sausage machine popping out perfectly formed young workers who can pick up a spanner, hair clippers or a copy of Photoshop and start productive work straight after being shown where the tea room is.

Those business owners are deluded.

None of that’s to say educators shouldn’t be adapting to their times as well as being open and transparent but the idea that the role of schools is to equip kids with the skills we need today would see them unprepared for next decade’s economy.

Equally however, Australia’s universities and training colleges have been encouraged to offer third rate courses to overseas students attracted by the prospect of getting permanent residence in the country. That bums on seats model had hurt the quality of the nation’s education sector and the skill levels of graduates.

Attitudes

The most essential part of building any nation’s industry is the attitude of people – if the prevailing view is it’s too hard, or threatens established interests then it won’t happen.

Probably the best advantage New South Wales, and all of Australia have, is a comparatively young, diverse and outward looking population.

The best thing the government can do in trying to build new sectors, be they in the digital economy or anywhere else, is to fix what they can such as procurement, open data or taxation and get out of the way.

A constant dreams of governments is to build the next Silicon Valley, just as it once was to build the next Detroit or Birmingham.

The era of the big engineering works passed, at least in the Western world, and the age of venture capital driven social media platforms will probably be over soon as well.

Aping someone else’s success – while ignoring the historical factors and accidents that created it – seems a guaranteed way to disappointment.

The best part to build a digital economy, or any thriving society, is to encourage the risk takers and the inventors. Bring them together, let them loose and you build the next economic powerhouse.

Competing in a high cost world

Business can compete when costs are high and currencies are strong

It’s often said that Australian businesses can’t compete and the nation can no longer can support manufacturing or high tech industries.

With the high Australian dollar, many economists, business leaders and politicians have said industries have to adapt to being an expensive economy. Interestingly, few of these experts explain how businesses should, or can, adapt.

At the recent Kickstart forum I had the opportunity to meet two Australian companies succeeding with high tech products and using the high dollar to their advantage.

David Jackman of Pronto Software, a thirty year old business intelligence company, is proud of the fact the business he leads does most of its development in Australia. As business owned by it’s employees – Pronto had an employee buy out in the late 1990s – he sees his role as building the business to last centuries like some European businesses.

Linus Chang developed his Melbourne based business, Backup Assist, when he discovered the data backup tools built into Microsoft Windows weren’t very good. Taking the basic Microsoft products, he added the features that made these tools usuable at a fraction of the cost of bigger companies’ data backup software.

Today Backup Assist is sold in 124 countries with the US as the biggest market.

Both Backup Assist and Pronto find keeping the bulk of the software development in house in Australia makes sure they are producing high quality, effective products.

Software development isn’t the only sector dealing with the high cost evironment, David Jackman says Pronto has many customers in the Australian manufacturing industry who have adapted to a high cost environment with niche and high value added products.

Identifying these opportunities is where the challenge lies; what do our businesses do well that customers in international markets are prepared to pay for?

We also have an advantage in being a relatively open economy with first world standards. This is another reason why investment in new infrastructure like the National Broadband Network is important.

One thing is for sure, selling low priced commodity products with small margins is not where the future lies, even if the Aussie dollar collapses.

We have success stories and businesses adapting to being a high cost economy, it’s a matter of understanding how our industries can add value while do this.