Author: Paul Wallbank

Paul Wallbank is a speaker and writer charting how technology is changing society and business. Paul has four regular technology advice radio programs on ABC, a weekly column on the smartcompany.com.au website and has published seven books.

Retail’s evolving face

The retail industry’s evolution tracks how technology is changing our lives.

On the back of last week’s discussion about Amazon’s Australian expansion, I spoke to Sydney community radio station 2SER-FM this morning about the challenges facing suburban shopping strips.

Like the rest of the world, Australia’s suburban and small town retail strips have been doing it hard for a generation. While technology has a lot to do with this, it’s not online commerce that’s the killer.

The decline, recovery and shift of the suburban retail strip really started in the 1960s as people moved to the suburbs and started shopping at supermarkets – the technology driving that shift was affordable motor cars and refrigerators.

Around the developed world, the removal of tram (or streetcar) systems during the 1950s and 60s also hurt the inner city shops as local foot traffic declined. In Sydney it’s striking that fifty years after the removal of the tram system those suburbs that developed around them are still easily recognisable.

Shifting back to the city

In the 1980s another shift happened. Suddenly in the inner city became fashionable again for affluent and young residents and a new generation of shopkeepers sprung up attracted by relatively cheap rents.

The shift we’re now discussing is that generation of the 1980s and 90s has been dispersed as rents become increased or shops are demolished for apartment blocks that cater for the populations moving back into the inner cities now suburbia isn’t so fashionable.

Like all shifts this has consequences – just as the corner grocery store and local butcher was forced out of business by supermarkets in the 1960s and 70s, today the indy fashion store or old fashioned immigrant run cafe is being displaced by high priced gelato shops and restaurants catering for whatever the current food fad is.

The push against consumerism

With increasing rents, tenants increasingly become upmarket brands although the upper end of the market though is not what it was as the middle classes – particularly in cities like Sydney, San Francisco, Singapore and London – find soaring property prices make it harder to indulge in luxury items.

So high rents are driving shopkeepers out of business and in Australia at least, the perverse incentives in taxation laws and investment regulations means that landlords have a positive disincentive to drop their asking prices, which means vacancies increase.

Renew Newcastle successfully skirted landlords’ reluctance by ‘licensing’ space rather than leasing it from landlords. This allowed land banking property developers and valuation conscious commercial owners to let out space without formal leases that created legal or financial issues.

Regional challenges

It will be interesting to see how Newcastle will perform as that land banked buildings are being developed into apartments and, the developers hope, high rent shops.

For other regional areas the news isn’t as great with technology in everything from mining to agriculture automating more jobs out of existence. Much of the decline in country towns and regions during the Twentieth Century was due to the mechanisation of farming.

Pervasive broadband promises some hope for regional communities but at present both jobs and wealth are being increasingly concentrated into major population centres. This however may be a transition effect exacerbated by governments propping up financial sectors after the 2008 economic crisis.

It’s interesting too that the financial sector now is undergoing an automation revolution not dissimilar to that of the twentieth century agriculture industries, something that’s bad news for cities and governments staking their future on those sectors.

Technology driving change

A lesson from the last hundred years is how technology changes our communities, the arrival of refrigeration and the motor car allowed suburbs and supermarkets to develop. While tractors and trucks radically changed the structure of rural communities.

With the rise of new technologies in everything from agriculture to transport and manufacturing, we’ll see similar changes to our societies and businesses in coming years.

The changes faced by today’s retail business are part of an evolving economy, just as the horse and tram dependent city of hundred years ago looked very different from car dependent suburbias of the late 20th Century, tomorrow’s cities will look very different from today’s.

Similar posts:

Surviving Amazon’s onslaught

Some believe Amazon will crush Australian retail, but it’s likely most smart business will survive.

The long awaited launch of Amazon in Australia seems to be finally happening with reports the giant is scouting locations for logistics centres for a late 2018 launch.

While some are predicting a retail apocalypse, not all are convinced Amazon will do well. Australia doesn’t have a catalog culture buying culture like the United States and, as german supermarket chain Aldi found, the nation’s high property prices and restrictive zoning rules makes acquiring sites difficult.

A further impediment for Amazon in Australia is the last mile with Australia Post dominating the delivery business, despite its mediocre service, and the dominance of incumbent retailers in the suburbs where most Australians live means the US giant isn’t guaranteed success.

Whether Amazon’s entry into a market does mean a retail apocalypse is also another question, while its clear the mall era is drawing to close there are plenty of success stores with chains like Ulta Beauty, Sephora and Kiehls – not to mention the Apple Store – thriving despite Amazon’s growth over the past twenty years.

In the Australian context, a bigger question should be around why local equivalents haven’t thrived with Billabong, Pumpkin Patch and Kathmandu all failing while the established majors have barely glanced at overseas markets – Harvey Norman and Westfield being the stand out exceptions, although the former hasn’t been a great success.

Even in Amazon’s original market of bookselling, big chains like Borders have fallen victim but local independent bookshops have survived and grown despite the online threats. So local retailers can weather an Amazon onslaught.

Another benefit of Amazon starting in Australia is to encourage new business, particularly given the US giant is rumoured to be focusing on groceries as it gives new entrants to the market an opportunity to enter without having to deal with the stultifying duopoly that dominates the market.

One thing is clear though, Australian retailers have been slow in moving into online and international markets, probably due to the luxury of catering to consumers in an economy that hasn’t been troubled by recession for a generation.

The year’s warning that Amazon will be opening shop is a warning for Australian business to lift their game and compete. Those who don’t won’t have any excuses.

Similar posts:

When startups should think like designers

Design, funding and research are critical parts of getting a product successfully to market says Design + Industry’s Murray Hunter

Thinking about design and getting to market should be a priority for startup businesses says Murray Hunter, founder of Sydney’s Design + Industry.

Having won over 160 design awards during 30 years of running Design + Industry and employing 50 specialist designers and engineers in his Sydney and Melbourne offices, Murray has many insights in what makes a successful product.

“Some of those companies have gone on to become world leaders, it’s a hell of ride and it’s a fabulous relationship where 15 or 20 years later you have a client relationship that’s dominating the world.” he recalls.

Thinking like designers

The current startup scene in Australia provides an opportunity for the country, Murray believes.

“We’re losing manufacturing industry but there’s a whole new wave of businesses and startups based around new technologies, particularly around IoT”

Cyclone pruning shears

“The world wants to think like designers and lead by innovation, which is a really interesting line. You have the American government that wants to design think and you have all these large accounting firms that want to be design thinkers as well.”

“But everyone wants to be innovative and provide a better experience to the customer and we have all these new technologies that are giving us the ability to have a lot more information, be more informative.”

“It started with Apple with the iPod and then the iPhone and it’s led right through so we now have high expectations of what we want for products and services.”

Finding funding

His advice to startups is blunt, “the first thing you need is funding, If you don’t, start the process of development sufficient to develop collateral which enables you to gain investors.”

The development process itself starts with knowing the market.

“Products should be designed to suit the market, not on a hunch,” he says. “So you start with what the market wants and you go backwards. You don’t get dressed and say ‘where are we going’, you find out where you’re going and then get dressed.”

“The intelligent and qualified entrepreneur will have a lot of the problems solved, they’ll have done research, they’ll have knowledge of the market, they’ll know the segments it’s aimed at and quite often they’ll have route to market realised.”

BlueAnt Pump HD earbuds

“Crowdfunding makes a big difference as entrepreneurs can run a crowdfunding campaign, get initial sales and worldwide recognition for it. If it isn’t successful, that could be the end of it. Others know people who can fund it.”

“They may not have funding or they may, we have quite a few suppliers around us who will help with the funding process. We also know private individuals with deep pockets who are interested in investing.”

Changing the design industry

Over the past few years, the design industry has changed dramatically with the rise of Computer Aided Design, 3D printing along with new materials and manufacturing methods. Medical devices are one area that’s seen a rapid change.

“Thirty years ago medical products were low volume,” Murray recalls. “In Australia typically we’d make them out of sheet metal. Now the volumes have increased because the world is more easily accessed so we’re designing for higher volumes.”

CliniCloud non contact thermometer

“We’ve also got low cost manufacturing sources to provide solutions so we can develop a more sophisticated product that will be better received worldwide.

“The biggest change I think has been CAD (Computer Aided Design), the Internet and 3D printing.”

“CAD because we went from 2D drawing to 3D models, the internet because we no longer send DVDs or CAD files to our manufacturing partners and it means we can access manufacturers all over the world.”

“We’re working on a 3D printer that can make biomatter, in other words skin, there’s talk of doing teeth with the rigid externals and soft nerves. So where we go I can only think of organs, prosthetics, replacing cartilage which is a big thing for the elderly.”

Similar posts:

Innovating American government

The Trump Administration promises a lot from the Office of American Innovation. Can it deliver?

On Monday President Trump signed into existence the White House Office of American Innovation, an agency intended to “bring together the best ideas from Government, the private sector, and other thought leaders to ensure that America is ready to solve today’s most intractable problems.”

While appointing his son-in-law, Jared Kushner, to run the office is less than ideal, an agency that brainstorms ideas to transform government isn’t a bad idea.

There are limitations though, former Obama Administration tech official Tom Cochrane warns government is a very different beast from running a campaign.

In the government you say ‘I have a problem’ and it’s ‘let’s write out your requirements, here’s your six month procurement process and you can only use these thirty-three vendors who may be substandard or no good and the only reason they are on the list is because they understand how the contracting process works.’

That is just the tip of the iceberg of the challenges you face when you go into government.

Cochrane was only talking about managing websites and software while Trump and Kushner’s objectives are clearly more ambitious and, dare one suggest, somewhat driven by the neo-Liberal ideology that the private sector and markets hold all the answers to humanity’s’ problems.

How radically reforming government will go under the Trump Administration remains to be seen although the early failure with health insurance changes doesn’t bode well.

While the UK’s Government Digital Service and Australia’s Digital Transformation Office were largely confined to changing the delivery of public sector services, their remit seems somewhat closer to Kushner’s so it’s instructive reading the lessons from Paul Shetler who worked at both agencies.

His view is in the United States there’s a lot of opportunity on the digital transformation front.

They do have a lot of potential there. I do think the new administration is more likely to do something big to fix things than perhaps the Obama Administration was, because they are talking about national infrastructure.

If you to the United States it’s shocking, the physical level infrastructure is falling apart and on a digital level things are pretty much the same, if you look at the government websites many of them look like they are from the 1990s and they all look and act differently.

The US though has its own complexities with government being far more devolved and ‘hands off’ than the UK or Australian Federal governments, not to mention the tricky political environment the Trump Administration is faced with.

Possibly the biggest challenge Kushner’s office will face is the question of leadership. Shetler points out pushing change through government agencies requires decisive action.

In the UK, we didn’t focus on consensus we focused on getting things done. When I first met with Francis Maude he said ‘this is not a change management process – this is transformation.”

One of the major reasons why the UK was a successful as they were was because Francis Maude was the minister for five years. It became clear he was going to see this through and if you were going to fight, you were going to lose. People got into line.

So for the Trump Administration and Jared Kushner, the success of the Office of American Innovation is going to lie on how well they can lead and drive the process.

Given Donald Trump’s temperament and way of doing things, there’s no doubt he’ll take decisive action however bringing along disparate stakeholders and sectors of the community – not to mention deeply embedded interest groups – is going to take more than quickly Executive Orders or 3am tweets.

As Tom Cochrane and Paul Shetler observe, changing the direction of governments is not an easy task and it takes persistence, determination and vision.

History will be watching how well Trump and Kushner succeed.

Similar posts:

Hacking the connected vehicle

American farmers hacking their tractors with Ukrainian software are a taste of what’s to come in the connected economy.

What happens when a vehicle manufacturer locks down their products’ software? John Deere’s customers are finding out as American farmers turn to Ukrainian software vendors for software to maintain their tractors.

John Deere’s behaviour is extreme as almost every component of a modern tractor has a software component which leaves farmers at the mercy of the company’s dealers and authorised mechanics.

So understandably the farmers are finding ways to hack their equipment to reduce downtime and costs, something permitted in the US after an exemption to the Digital Millennium Copyright Act (DCMA) was granted to vehicle software.

Vendor control over connected vehicles is a bigger problem for consumers than just maintaining the software, as the information collected from these devices becomes more valuable who controls that data becomes more important.

With global supply chains, increased regulatory requirements and demanding markets, the agricultural industries are probably leading the world in applying the Internet of Things and Big Data, so the challenges faced by farmers are things which will affect us all.

As everything from toasters to motor cars become connected and dependent upon code, the conflict between proprietary software, open markets and user rights is going to grow.

Consumers and the free market can only do so much to control the flows of data and who owns them. It’s hard to see how governments can’t become involved in how information is owned, traded and stored.

Similar posts:

Deeper in data and debt

Data tools are getting more powerful as the information collected about us grows. It presents us with some important choices

Data collection agency Experian’s deal with Finicity to collect and process borrower information is an example of the how Big Data is being used by the financial services sector.

Recently I wrote a piece for Fairfax Media on the Science of Money which included some quotes from Experian’s Australian managers. They were quite explicit about their use of data.

That a company like Experian is adopting more advanced analytics isn’t surprising given the power of the tools available. What’s also driving the adoption is the proliferation of devices available to track people.

Notable among those devices are personal assistants, as David Pogue writes in Scientific American, household technologies like Amazon Alexa, Google Home and Apple Siri are vacuuming up huge amounts of data on our behaviour, likes and dislikes.

Increasingly all of this is being fed into machines that determine our suitability for marketing campaigns, credit and financial services.

For companies like Experian this is a massive opportunity although the focus on credit suitability betrays a mindset more suited to the 1980s finance boom than the more complex times of the early 21st century.

It’s hard though not to think that given a choice the finance sector will happily use these tools to take us into another subprime lending crisis which would be a shame as these technologies’ potential for allowing us to make better decisions is immense.

How we use these tools will define our businesses, economies and communities over the next thirty years. We need to be careful about some of the choices we make.

Similar posts:

Government cargo cults and community building

Melbourne hopes a culture of government subsidies will build an industry ecosystem, history isn’t on its side.

Following the post on Building Digital Communities a few weeks ago, some friends forwarded me an excellent article from New Zealand tech evangelist Dan Khan on what he learned from from observing the development of Boulder’s tech community.

Khan’s view is values are at the root of building a startup community, an open and distributed network of people bringing their disparate but relevant skills to a region is what builds an industry cluster.

Equally it’s about values being aligned so the community reinforces its own strengths and advantages.

To many, the startup community is not a tangible thing. Instead, it’s an amorphous, ever-changing network of support, knowledge, resources, and relationships which gives those creating ventures, a boost up to the next level when they need it.

It’s simultaneously a safety net that eases founders down when their ideas fail; and a resounding cheerleader and network of scale for those flying high.

The New Zealand experience is informative as Wellington’s tech sector explodes on the back of special effects studio, WETA along with Xero and the vibrant startup community based around initiatives like Enspiral. So much so the city is offering free trips to prospective workers.

Enspiral itself is a good example of grass roots community initiative where a contractor’s collective has grown to 300 strong organisation building connections between Wellington’s creative, tech and businesses groups.

History is on the side of those building grass roots communities as almost every industrial hub has grown out of motivated individuals harnessing a local region’s advantages to dominate a sector.

As Steve Blank’s Secret History of Silicon Valley describes, the rise of today’s venture capital tech sector business model came out of a group of driven individuals leveraging the United States’ massive electronics research spending through the mid Twentieth Century along with a boost from tax changes in the late 1970s.

Silicon Valley’s startup culture owes a lot to government spending and policies but the development of today’s ecosystem took fifty years and many motivated individuals working together.

Which brings us to to the Victorian state government’s funding the establishment of a 500 Startups outpost in Melbourne. This is part of a sustained campaign to subsidise global tech companies’ setting up their regional offices in the city.

As part of that campaign the Victorian state government has promised to spend sixty million Australian dollars on building a startup ecosystem in Melbourne, it’s a classic example of top down planning.

History hasn’t been kind to Victoria in its tech industry subsidies, with the state government spending ten of millions at the beginning of the century to develop region’s gaming industry only to see the sector collapse as a high Australian dollar and soaring costs saw international studios leave and local producers close.

In 1998, then Victorian Premier Jeff Kennett, triumphantly proclaimed subsidising Netscape’s Australian office would lead to Melbourne becoming a global tech centre. Twenty years later, that game continues.

500 Startups founder Dave McClure hints at how the outpost will be limited, “Partnering with Melbourne and LaunchVic helps us bring a slice of Silicon Valley to Australia through our startup, investor, and corporate programs.”

So there’s a strong sense of deja-vu, dare one say even cargo cult thinking, in the weekend’s announcement.

While bringing a slice of Silicon Valley to Melbourne is nice, it doesn’t build an ecosystem which will take years of patient encouragement of local, motivated individuals. What’s worse, the government intervention threatens to distort the market and stifle the culture of grass roots development Khan identifies as being critical.

The question for Melbourne’s startup community is how much patience does the government have? The nation’s political culture of announceables, which the current state minister is an enthusiastic participant, doesn’t bode well.

For the moment, the priority for the Melbourne startup community is to decide if public sector funding should be a critical part of their ecosystem. If government subsidies for foreign businesses are the answer then ensuring bipartisan and long term political support for strategic initiatives should also be close to the top of the list.

Similar posts: