innovation | Paul Wallbank - Communications Professional

A consumerist utopia – where does Australia go in the 21st Century?

A raft of reports and media stories highlight the threats to Australia’s continued prosperity but the nation’s business leaders aren’t listening.

Today has been a big day for Australian navel-gazing with a range of reports released on the country’s prospects on in the Twenty-First Century.

One of the reports was the Joined Up Innovation survey commissioned by Microsoft and written by PwC, I wrote a story for Business Spectator on the results.

While the Microsoft report focused on the small business sector, Startup Aus released their Crossroads report that warns Australia is falling behind the rest of the world. Smart Company’s Rose Powell has a more detailed summary of the report.

Alan Noble, head of Google’s Australian Engineering operations warns, “we still lag behind many other nations, with one of the lowest rates of startup formation in the world, and one of the lowest rates of venture capital investment.”

“If we fail to address this, we risk forfeiting over $100 billion in economic benefits from emerging tech companies, and an irreversible decline in Australia’s competitiveness.”

Looking in from the outside

Particularly notable from the two surveys is that the discussion about Australia’s tech competitiveness is the debate is being led by two local employees of US Multinationals.

For a local perspective, the Macrobusiness blog joins the day’s chorus with a long examination of the risks to Australia’s living standards by being too far down the global value chain.

In the Business Spectator piece, I compared some of PwC’s recommendations with the efforts of the UK and Singapore to rebuild their manufacturing industries.

Australia’s collective decision

For Australia, it’s probably way too late to worry about most of the manufacturing industry as in the 1980s the country made a collective – and almost unanimous – decision to shift the economy to being resources and high value added services.

The high value added services haven’t eventuated; mainly because the internet has shifted the global dynamics towards lower cost centres and partly because Australian business leaders decided it was easier to exploit their domestic market power rather than compete globally.

Mining proved to be a better bet, more by the accident of China’s turn of the century boom rather than any deliberate policy, however the industry employs less than ten percent of the workforce and the vast majority of Australians living in the South East corner of the country have little contact with the resources industry.

A consumerist utopia

For most Australians, employment and prosperity relies upon a growing population driving city GDP growth with domestic wealth supported by buoyant property prices. Australia truly is the consumerist utopia.

As a result of a booming, seemingly unstoppable, housing market and an expending resources sector, Australia’s exchange rate has soared while the nation’s productivity has slumped.

Making matters worse is that outside of mining and a few agricultural markets most of Australia’s industry is grossly expensive by global standards and suffering from chronic under-investment.

An unsustainable economic model

That model is not sustainable, it will take one shock to Australia’s housing market to see the good burghers of Brisbane, Sydney and Melbourne impoverished so the nation’s continued prosperity requires something to drive the economy beyond low interest rates and Chinese commodity purchases.

Whether Australia’s business and political leadership are capable of hearing and reacting to these reports remains to be seen, but they will have no excuse to say they weren’t warned.

An era of exponential innovation

Deloitte Center for the Edge founder John Hagel talks about our 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

Nothing is stabilising – welcome to an era of exponential innovation

John Hagel of Deloitte’s Centre for the Edge joined Decoding the New Economy to discuss his view that we’re living in an age of exponential innovation.

“Increasingly our view is that it’s creating a challenge for companies, traditional businesses who say ‘we’ve been operating in a linear fashion for decades or in some cases centuries or more’ but how do we move to an exponential approach to technology so we don’t get overwhelmed.”

I’ll be writing the interview up in more detail later, but for the moment enjoy the video.

Image of John Hagel by Trycatch though Wikimedia

Driving out inefficiencies

Inefficiencies are being squeezed out of business and corporations are going to have to adapt, warns the World Economic Forum.

“We’re driving inefficiencies out of every single facet of life,” AT&T CEO Randall L. Stephenson told The World Economic Forum’s New Digital Context panel last month.

The CEO panel at the Davos forum, which included Yahoo!’s Marissa Mayer, Salesforce’s Mac Benioff, Cisco’s John Chambers and Gavin Patterson of BT discussed how corporations of all sizes are being affected by rapid market changes.

“All this bandwidth, all these connected devices, are as disruptive as anything this society has ever seen,” Stephenson said.

“Companies that aren’t moving and driving the new technologies are companies that don’t stay alive.”

Stephenson’s view was supported by Cisco CEO John Chambers, “if you look at big companies only a third of us will exist in a meaningful way in two decades.”

Chambers cited Cisco’s experience from the past two decades to illustrate how business is rapidly changing, “my competitors from fifteen, twenty years ago – none of them exist or they’ve exited. From ten to fifteen years ago only one exists, from five to ten years ago only a few.”

“If you don’t disrupt, you get left behind,” warned Chambers.

Chambers’ advice to managers is that teams have to be empowered and encouraged to take risks and learn from failures, advice endorsed by Yahoo!’s Marissa Mayer.

“The best thing you can an executive can do is play defense, not offense. Get out everybody out of the way and set up an evironment where they can really run and make a difference.”

Yahoo!’s Marissa Mayer endorsed the change, describing a much flatter organization; “we try and run things really flat, really transparent.”

That flat organisation is really the biggest risk to many executives in staid, safe organisations; it means fewer middle managers as the workplace is increasingly automated.

As businesses adopt new technologies, the need for Executive Vice Presidents or Group General Managers is eliminated – along with the armies of assistants and underlings required to help these folk in their roles.

In the past, those layers of management have isolated senior executives from their customers which Salesforce’s Marc Benioff is a luxury companies can’t afford in the current marketplace, “everything is going faster, companies have to change faster.”

“Today if you’re not listening to your customers more deeply than ever before and not reacting to them more rapidly than every before,then you are probably making a mistake,” warns Benioff.

Most of those in the room at WEF were the world’s top executives and government officials, how many of them take note of how business is changing will become clear in the very near future.

There’s also a warning for those government leaders on how employment and government services are going change in the near future which a lesson that needs to be heeded as policies are developed.

Now’s the time for every manager, business owner or executive to look at the inefficiencies in their workplace and whether it can be eliminated either through technology or business restructuring. It may well save you from being identified as an inefficiency yourself.

Steam train image courtesy of Gabriel77 through sxc.hu

The evolution of the Internet of Things

Cooking Hacks shows how the internet of things evolved out of other technologies

One of the notable things about modern technology is that few of the developments are actually new, the Internet of Things is a good example of this.

Most of the tech we talk about is a collection of existing technologies that have been cobbled together — cloud computing, 3D printing and the Internet of things are all good examples of this.

Libelium’s Cooking Hacks community page has a good infographic on how the makers’ movement, crowd funding and miniaturization have driven the development of the Internet of Things, 3D printing and wearable technologies.

The diagram, shown at the bottom of the post, is a good illustration of how technologies are evolving and the businesses that are being spawned from the developments.

Cooking Hack’s infographic show why it’s an exciting time to be in business.

On looking foolish

Looking foolish is one of the biggest risks when taking chances in business. It’s something every innovator and entrepreneur has to consider.

Venture Capital investor Mark Suster explains why he doesn’t mind looking foolish with his choice of investors on his blog today.

One of the toughest things in life is taking the risk of looking foolish in front of your peers yet that’s what the real high risk inventors, innovators and entrepreneurs do with their ventures.

Light bulbs and the telephone looked ridiculous to many at the time they were invented and no doubt the inventor of the wheel or the Neanderthal who came up with the idea of cooking meat in a fire both probably received a far bit of scorn when they told the others in their tribe about their idea.

While Suster is talking about ‘moonshot investments’, even the most modest venture is going to attract scorn.

There would be few people who decided to buy a doughnut franchise, establish a cafe or set up a lawn mowing service who weren’t told by some of their relatives, friends or colleagues that they are doing the wrong thing and they should stick to their safe job in their cosy cubicle.

Should someone want to change the way doughnuts are made or lawns mowed, then they can expect even more naysayers laughing at them.

In this current craze about ‘entrepreneurship’ it’s easy to overlook the real costs and risks of running any sort of business. Looking foolish is another of those risks.

Having a thick hide is another useful attribute when you’re investing, running a business or changing an industry.

Peak employment and the political challenge

The current angst about employment in an age of automation is a political, not technological, problem

This week’s edition of The Economist asks about the Future of Employment and where the jobs are in a society where work is increasingly done by machines.

For the Economist the conclusion is that the future of employment is ‘complex’ and observes economists and politicians haven’t given enough thought to the effects of the changing workplace and the dislocation of many workers.

Much of the Economist’s story is based around the ideas of professors at MIT Erik Brynjolfsson and Andrew McAfee in their upcoming book “The Second Machine Age”.

The race with the machines

Professor Brynjolfsson gives his view at TED 2013 in the key to growth? Race with the machines, a presentation countered by Robert Gordon in the ‘death of innovation, the end of growth’ and followed by an excellent debate between the two.

Brynjolfsson cites the dilemma of bookkeepers being displaced by software applications such as Intuit Turbotax as an example of where service sector staff are being displaced.

“How can a skilled worker compete with a $39 piece of software?” Brynjolfsson asks.

“She can’t. Today millions of Americans do have cheaper, faster, more accurate tax preparations and the founders of Intuit have done very well for themselves. But 17% of tax preparers no longer have jobs.

“That is a microcosm of what’s happening not just in software and services, but in media and music, in finance, manufacturing, in retailing and trade. In short, in every industry.”

The great decoupling

Brynjolfsson’s key point is that workers’ wages have been decoupled from productivity and that the workforce isn’t sharing the rewards of improved practices and increased wealth.

That is certainly true over the last forty years, however that may not be a technological effect, but the business consequences of liberalising the financial sector which has seen massive pay increases to the banking industry and managerial classes that has been way out of kilter with the rest of the workforce.

It may well be the current golden era of high executive salaries is a transition effect of an evolving economy, albeit one where our grandchildren will puzzle over an era where a failed executive can receive a $100 million payout on being fired.

As The Economist points out technological change itself tends to create new jobs that make up for those displaced in old industries, this is a view supported by GE’s Chief Economist Marco Annunziata.

The main problem that Brynjolfsson identifies is the medium term issue of dislocated workers finding themselves out of work with superseded skills and, as The Economist point out, it’s clear the developed world’s political leaders haven’t though through the consequences of that transition.

In almost every sense, the current crisis of confidence about employment prospects is more a political and social problem rather than technological.

Helping displaced workers is going to be the greatest challenge for today’s generation of business and political leaders, the real question is are they up to that task?

A triumph over orthodoxy – Seven years of the iPhone

The Apple iPhone reinvented the smartphone and mobile internet industries. Can it also define the internet of things?

“Once in a while a revolutionary product comes along that changes everything.”

Those were Steve Jobs’ words when he launched the iPhone seven years ago.

It was a strong opening that was reinforced by the event’s tag line, “Today Apple reinvents the phone.”

It wasn’t an idle boast, the iPhone was a leapfrog development – using Jobs’ words – over the existing clunky smartphones and it changed the entire industry and spawned some new ones.

Smart Company’s Yolanda Redrup asked me for a few comments on her story on the iPhone’s birthday and her questions triggered some thoughts on just how the iPhone changed the mobile phone and telco industries.

A triumph over orthodoxy

Apple’s iPhone triumph was born out of the established players’ orthodoxy; companies like Nokia, Blackberry and Palm were wedded to the idea that a tactile QWERTY keyboard was essential for a smartphone.

Those keyboards took away nearly half the real estate on the phone, Jobs called it “the lower forty”, and it made surfing the net a painful task, let alone watching videos or movies.

Full featured keyboards made making calls difficult as well. One of the barriers of adopting smartphones was that using the things as phones was quite difficult.

By having software keyboard and dialling pads that only appeared when needed, Apple solved the problems that faced smartphone users.

Disrupting the telcos

The other orthodoxy in the smartphone industry was that the telcos were essential gatekeepers. Nokia and the other incumbents put the needs of telecommunications companies over users of their phones.

As a consequence email and web browsing capabilities of the existing smartphones were crippled as the telcos tried to lock their customers into their own proprietary networks rather that giving them access to the public internet.

With the iPhone, Apple broke out of that telco dominance and started to dictate terms to the phone companies. This wouldn’t have been possible if the iPhone hadn’t been a far better, and much more popular, product.

Building the app store

Another area where the iPhone disrupted the phone companies’ business was with the App Store. Every smartphone had its own add-on programs but they were expensive with poor functionality and developers had to build versions for every company’s operating system.

Both the telcos and the phone vendors could see that app stores were a potentially lucrative area but systemically failed to execute on the idea with clunky and expensive software.

The App Store showed how smartphones should work and coupled with music, another area where the handset vendors dismally failed, Apple is now earning over a billion dollars a month from iTunes.

Technological change

Some of the iPhone’s success was due to technologies maturing; earlier smartphones were crippled by slow data connections over 2G or CDMA networks and cloud computing, or software-as-a-service as it was then called, was just beginning to mature as a technology.

Cloud services and 3G connectivity meant the iPhone could hand off most apps’ processing needs to the service provider, something that the earlier smartphones couldn’t do because the technology wasn’t there.

That connectivity did come at a cost, the iPhone and its competitors created huge challenges for telcos as they struggled to meet the data demands of their enthusiastic web surfing customers.

Looking at the future

While the iPhone came to dominate the smartphone market, that dominance didn’t last as Google Android devices started to flood the marketplace. Now Samsung is as big a player as Apple and a wave of cheap Chinese products are now flooding the industry.

For Apple and the other smartphone vendors the opportunities now lie in the internet of things (IoT) as connected cars, workplaces and homes require a device to control them. That device is often the smartphone.

In the next few years the market battleground is going to be creating the applications, platforms and ecosystems around these IoT technologies and its no coincidence that Apple has partnered with BMW on providing software for their smartcar.

Jobs finished his iPhone presentation with the Wayne Gretzky quote, “I skate to where the puck is going to be, not where it has been” and committed Apple to always being where the market is going to be.

Where the market is going to be in the next seven years is anyone’s guess, but it would be dangerous to count Apple out.

Falling out of love with Google Glass

How the pundits turned against Google glass is a lesson in tech media management

Media hype is normal in the tech industry, it’s common for a new product to receive swooning coverage in its early days but when the press falls out of love with a device, it can be a harsh breakup.

Google Glass is suffering one of those harsh breakups with with writers and bloggers who were formerly gushing over the product now being publicly unimpressed with the product.

First out the blocks was Wired’s Matt Honan who described his year as a ‘glasshole’.

Honan is enthusiastic about the future of wearable devices but doesn’t see Google Glass as being ready for prime time.

Which is to say, I’m really, really excited about where Glass is going. I’m less excited about where it is.

Adding to the anti Google vibe was tech maven Robert Scoble who after his year of using the device decided it was too expensive and clumsy.

Scoble’s point is the current generation of wearable tech is too clunky and user unfriendly to solve the problems it hopes to address.

Daring Fireball’s John Gruber — who wasn’t one of those gushing over Google Glass — points out this is the exactly why Windows XP tablets were such a failure in the marketplace.

Gruber also points out another similarity between Google Glass and Microsoft’s attempts at a tablet computer. Each company’s staff were reluctant to use them.

When your own employees don’t use or support your product, the problem is with the product, not the employees.

The eating your own dog food mantra cuts both ways; if your own staff find your products unattractive, then you can’t expect customers to warm to them.

In some ways it’s ironic that Google are receiving press scorn as the company plays the tech media like a violin with privileged insiders getting early access to products create an aura of exclusivity.

Glass was a classic example of this with a small group of tech journalists getting access to the product, unfortunately those insiders are turning out to be less than impressed.

Even if it turns out the Google Glass is a failure, it will have been one of the company’s brave moon shots and no doubt what they’ve learned in usablity and mobile data will be very useful to other parts of the business.

Crowdsourcing jet engines

How high tech collaboration can drive industrial innovation

Crowdsourcing, harnessing the wisdom of crowds, has been a buzzword for probably the last five years.

It’s often cited as a way for companies and entrepreneurs to access skills that have been largely unattainable in the past.

Much of the talk about crowdsourcing has revolved around consumer or marketing projects, say designing logos, and all too often the conversation revolves around getting people to do creative projects for free – the real opportunity though may well lie in the industrial sector tapping into that group wisdom.

Open innovation and jet engines

An example of how the industrial sector is using crowdsourcing is GE’s Open Innovation project where the company is offering prizes for the best ideas in developing jet engine parts and advanced 3D printing techniques.

Like the Kaggle data analysis platform, GE’s project shows that crowdsourcing isn’t just about getting a cheap logo or comparing shoe designs, it can be used to develop high tech equipment.

Another example of high level crowdsourcing is the DARPA Robotics Challenge where the US military research agency found that enthusiastic amateurs, motivated students and wily entrepreneurs were able to get results that decades of consulting from major defense contractors could achieve as a New Yorker story on Google’s robotic cars describes;

In one year, they’d made more progress than DARPA’s contractors had in twenty. “You had these crazy people who didn’t know how hard it was,” Thrun told me. “They said, ‘Look, I have a car, I have a computer, and I need a million bucks.’ So they were doing things in their home shops, putting something together that had never been done in robotics before, and some were insanely impressive.” A team of students from Palos Verdes High School in California, led by a seventeen-year-old named Chris Seide, built a self-driving “Doom Buggy” that, Thrun recalls, could change lanes and stop at stop signs. A Ford S.U.V. programmed by some insurance-company employees from Louisiana finished just thirty-seven minutes behind Stanley. Their lead programmer had lifted his preliminary algorithms from textbooks on video-game design.

The maturing of various technologies like 3D printing, big data and collaboration software are making it easier to democratise and open the innovation process, as DARPA found this can also save costs and accelerate development cycles.

Balancing crowdsourcing

GE’s Chief Economist Marco Marco Annunziata sees engineering crowdsourcing as an opportunity to move faster and harness skills even companies as big as his struggle to find, “how much of the innovation process do you keep in house?” He asks.

That’s a balance many managers are going to consider as they find their markets evolving faster than the capabilities of their own designers and development processes. It may well be that many will find their future innovations come from outside their organisations.

It’s only technology

We’re doing ourselves a disservice when dismissing new technology stories

“We treated Bitcoin as a tech story but now it’s become a much more serious economic story,” said a radio show compere earlier today when discussing the digital currency.

One of the great frustrations of any technologist is the pigeon holing of tech stories – the real news is somewhere else while tech and science stories are treated as oddities, usually falling into a ‘mad professor’, ‘the internet ate my granny’ or ‘look at this cool gadget’ type pieces.

Defining the world we live in

In reality, technology defines the world in which we live. It’s tech that means you have running water in the morning, food in the supermarket and the electricity or gas to cook it with.

Many of us work in jobs that were unknown a hundred years ago and even in long established roles like farming technology has changed the workplace unrecognisably.

Even if you’re a blacksmith, coach carriage driver or papyrus paper maker untouched by the last century’s developments, all of those roles came about because of earlier advances in technology.

The modern hubris

Right now we seem to be falling for the hubris that we are exceptional – the first generation ever to have our lives changed by technology.

If technological change is the measure of a great generation then that title belongs to our great grandparents.

Those born at the beginning of last century in what we now call the developed world saw the rollout of mains electricity, telephones, the motor car, penicillin and the end of childhood mortality.

For those born in the 1890s who survived childhood, then two world wars, the Spanish Flu outbreak and the Great Depression, many lived to see a man walk on the moon. Something beyond imagination at the time of their birth.

It’s something we need to keep in perspective when we talk about today’s technological advances.

Which brings us back to ‘it’s only a tech story’ – it may well be that technology and science are discounted today because we now take the complex systems that underpin our comfortable first world lifestyles for granted.

In which case we should be paying more attention to those tech stories, as they are showing where future prosperity will come from.

Where will the jobs come from in the internet of things?

The internet of things promises to make industry more efficient, but what will happen to employment?

One of the common worries about the internet of things and the automation of business processes is that many jobs are going to be lost as a consequence.

This is a fair concern however we need to keep in perspective just how radically employment has changed in the last century.

Concerns about technology displacing occupations is nothing new; in the eighteenth century the Luddite movement was a reaction to skilled workers being displaced by new innovations.

In an interview with GE’s Chief Economist Marco Annunziata, published in Business Spectator, we covered this topic and Marco had a valid point that the bulk of the Western world’s workforce was employed in agriculture a hundred years ago.

Today it’s less than two percent in most developed country as agriculture became heavily automated, yet most of those workers who would once have worked in the fields have productive jobs. “As an economist I look at this over a long term perspective and I’ve heard this concern about technology displacing jobs over and over again.”

Annunziata sees new roles being created, among them what he calls ‘mechanical-digital engineers’ who understand both how the actual machines work as well as the data and the software used to run and monitor them.

This isn’t to say there won’t be massive disruption – John Steinbeck’s Grapes of Wrath described the massive dislocation that happened in the United States with the first wave of agricultural mechanisation in the 1920s and the decline in rural communities is due directly to modern farms not needing the large workforces that sustained many country towns.

We can’t see where the jobs of the future will be and just roles like as Search Engine Optimisation and ecommerce experts where unheard of twenty years ago, our kids will be working in occupations we haven’t contemplated.

It’s up to us to give our kids the skills and flexibility of thinking that will let them find opportunities in a very different workplace.