Category: Disruption

When is a Chief Digital Officer needed?

The contrasting attitudes of Sydney, Melbourne and Brisbane towards the need of a Chief Digital Officer tell us much about how that role fits into an organisation

Last week the City of Sydney and councillor Jess Scully came under fire for an apparent backflip about the need for a Chief Digital Officer.

Scully, who was elected at last year’s council elections, told InnovationAus “the idea of a CDO or chief innovation officer seems a little bit redundant” a day before the organisation advertised for ‘chief, technology and digital services officer’.

To be fair to Scully, the roles being advertised by the City of Sydney were not truly CDOs in the way Brisbane, which has a small business focus, and Melbourne’s city councils have appointed them however it raises the question of whether Scully is right that an organisation doesn’t need a Chief Digital Officer.

As with most questions of this nature, the answer seems to be ‘it depends’. A key part of that discussion is where a CDO sits in an organisation. If they are senior executive or even board role, then it’s likely they are going to come into conflict with other c-suite managers such as the COO and CFO.

What’s worse, such a conflict in the c-suite can mean digital issues can be seen as ‘belonging’ to the CDO and not other key business units, which can only be to the detriment of the organisation.

There’s an argument too that the changes to organisations is so great from the changing economy and emerging technologies that responsibility of understanding and dealing with these changes is the role of the CEO and the board.

Where a CDO can be very effective is being an advocate for change and a trusted adviser to senior management, however even there risks lie as identified by Paul Shetler who found the siloing of agencies within the Australian Public Service meant it was very hard to effect any change in the face of resistance from an organisation’s vested interests.

It seems from the story that the City of Sydney has chosen an advocate and support role for the digital officer position, rather than formalise a CDO position who becomes a figurehead for the organisation’s digital evolution.

For a CDO or any technology advocate to be effective, there has to be support from the board and senior management. A technologist can only drive change if they have a mandate from the top.

Even then in some organisations the culture may be so factionalised that the response to change and drive for digital transformation has to come from the existing powerbrokers and a CDO could be at best a hindrance and even obstruct the process.

So the City of Sydney and Jess Scully aren’t wrong in not having a Chief Digital Officer, and neither are Melbourne and Brisbane for having one, it’s a deliberate decision by the various managements to choose the structure and roles that works best for their organisation. Driving change though always remains the responsibility of the board and the CEO they appoint.

The age of the curious business

Researching, experimenting and paying attention will be the keys to business survival during the coming technological wave

Last year the Committee for Economic Development, Australia (CEDA) warned over 40% of the nation’s jobs were at risk from automation over the next 15 years.

While that focus was on the risks to workers, it’s equally threatening for small business. Many companies and sole traders are facing the same disruptions from technological change.

This isn’t a new phenomenon, in the Twentieth century the motor car displaced thousands of small businesses that catered to the horse drawn economy and family run corner stores were displaced by the arrival of supermarkets in the 1950s.

Beyond the personal computer era

At the end of the last century the personal computer’s arrival revolutionised small businesses as suddenly tools that were previously only in the reach of big organisations were suddenly accessible to the most modest venture.

One of the early beneficiaries of that shift to desktop computers in 1990s was the bookkeeping industry which took off as a legion of home based contractors catered for local small businesses.

As the internet and smartphones came along, the bookkeeping market changed as features like bank feeds and receipt apps automated many previously manual tasks.

Despite those challenges the bookkeeping industry has survived and continues to grow with IBIS World estimating the overall accounting industry, which includes bookkeepers, grew 2.6% per year over the past five years.

Close to customers

The success of bookkeepers and accountants in navigating change is probably due to industry being close to their clients along with being early adopters of new technology, two things that caught the taxi industry out when Uber arrived.

Uber’s success in upturning the taxi industry illustrates just how important understanding emerging technologies is for smaller businesses. One industry currently facing massive disruption from robots is the construction sector.

The trades were thought to be relatively immune from automation – after all, who’s going to build a robot plumber? But now robots are moving into trades like bricklaying, as Australian startup Fastbrick Robotics shows.

Fastbrick are building a commercial bricklaying machine, Hadrian X, that automates the trade’s physical work and integrates with 3D printing technology.

In one respect the robot bricklayers are bad for the trade’s employment prospects but for older brickies with bad backs having a machine to help you is a godsend while for employers it improves productivity and reduces workplace accidents. It won’t be the end of the trade but the contractors who survive will have adapted to a very different construction industry.

Restructuring industries

That Fastbrick integrates with design software shows how the dynamics of the construction are changing. In 2014 Chinese company Winsun demonstrated how they can build ten houses in a day with large scale 3D printers.

While we may not see that particular technology in Australia, aspects of it will be used and they are going to change all the trades and professions related to the building industry.

Architects are one building industry group that have long dealt with technological change. Like bookkeepers, the arrival of personal computers completely changed their profession and those who adapted thrived.

Now with cloud computing services plugging into builders’ supply chains like Winsun and machines like Fastbrick’s, architects are closer than ever to the worksite and their customers. The ones who are adapting are the earlier adopters who are getting into these technologies further.

Disrupting the professions

Accountants and architects aren’t the only professions being affected, lawyers are facing a new wave of services using artificial intelligence to do many legal tasks ranging from a chatbot that appeals traffic fines to a program that predicts US Supreme Court decisions.

Like other sectors, it’s the early adopters in the legal sector who are adapting to a very different industry with much of the manual, lower level work being automated out.

The wave of technology we’re now seeing appear – including robots, autonomous vehicles, machine learning and artificial intelligence – are going to change our industries and workplaces dramatically in the next few years.

What the accounting industry and the architecture profession teach us is the businesses closest to their customers and those adopting technology early will be the ones who thrive in a very different industries. Researching, experimenting and paying attention will be the keys to business survival.

An open mindset

Even for the trades, survival during this wave of technological change will be a matter of watching the marketplace closely while being open to new methods and technologies.

Assuming it won’t happen to your industry is probably one of the riskiest things of all. Ten years ago the idea of smartphones revolutionising the taxi business or that robots could replace bricklayers was unthinkable. Now it’s almost expected.

The forces that are changing the workplace are also changing industries and markets, so small businesses will also be affected. It’s going to pay to be smart and curious.

Disruption comes at a high price

The cost of an industry’s disruption is felt by many stakeholders, as one US bank is finding.

Not so long ago, lending for taxi medallions was a safe bet. Now it’s pretty risky, as US lender Capital One revealed in a presentation last week.

Bloomberg reports the lender believes over eighty percent of its taxi loans are at risk of default.

In New York, medallion values have halved while in San Francisco taxi companies are going out of business. As a result Capital One’s loans that looked good a few years ago are now risky.

That problem is global. As I wrote two years ago for The Australian, the Aussie taxi industry has been tipped upside down by Uber and a cast of smaller competitors.

How the taxi companies failed to adapt is interesting. In most cities they were protected by a nest of laws and regulations that were ostensibly to protect passengers and drivers but actually acted to create high barriers that benefited license owners.

In most cities, certainly in New York and Sydney, taxis were dirty and unreliable – drivers were treated poorly and passengers were taken for granted – which made alternatives attractive even before the cheaper UberX and Lyft services arrived.

The protection also made the taxi companies slow to adopt new technologies. There was no reason why Australia’s Cabcharge or San Francisco’s Yellow Cab Company couldn’t have developed a smartphone app to order taxis, track progress and improve business expense reporting – that they didn’t speaks volumes about their inefficiency and complacency.

Being complacent was understandable though as regulators were tame and kept competitors out. Customers had nowhere else to go.

When customers did get the chance, they voted with their wallets and now its the bank accounts of taxi owners and their lenders who are hurting.

That Capital One is feeling the effects of that change is telling – when genuine disruption happens there’s a range of businesses, people and stakeholders affected. We should never underestimate that.

When does a digital strategy matter?

Some businesses are obsessing too much about their digital strategy, a UK based business professor believes.

Should a business spend a lot of time on its digital strategy? A recent article in the Harvard Business Review suggests many businesses, and consultants, are focusing too much on the technology.

Freek Vermeulen, an Associate Professor of Strategy and Entrepreneurship at the London Business School, describes how strategists may be making a mistake in responding to digital disruption. He argues many industries are learning the wrong lessons from disruptors like Amazon, Uber and Google.

In Vermeulan’s view, the world is not a globalised as we’d like to think and the network effects that work so well in internet based industries don’t necessarily translate to other sectors.

As a consequence, businesses that work on the assumption their industries will be affect the same way as, say, the taxi industry with Uber or newspapers by Google and Facebook may well be making their own strategic mistakes.

Digital is changing the nature of competitive advantage in many businesses – just like major technological developments have done before. However, the change will not be uniform across all industries. Digital technology is affecting and will affect different businesses in different ways. Miss these nuances and your strategic decisions could lead you seriously astray.

That’s certainly true and how technology or a rapidly changing economy affects each industry, or business, is far from uniform.

One of the case studies Vermeulan uses is that of a consulting firm that has largely eschewed digital platforms and focused on its human assets – primarily the skills and connections of its associates and staff.

While that’s undoubtedly true of all consulting businesses to some degree, the use of digital tools and marketing is changing that industry dramatically as well.

Vermeulan is right in that some industries may want to respond more slowly than others to digital or economic changes, however a business that disregards them or reacts too slowly may not know what hit it.

A broken trail of government digital dreams

Until Australian governments commit to longer term visions, it’s unlikely any of their digital dreams will be achieved.

Last August the centrepiece of the Australian government’s digital dream came to an end. The Canberra Times this week described how “the Turnbull government has quietly killed off one of its biggest plans for ‘digital transformation’; the hugely ambitious gov.au website project”.

The abandonment of the project was an ignominious end of the plans for a Prime Minister who had promised so much at the time of his appointment, and that a cabinet submission would be pulled minutes before it was due to be tabled indicates the convoluted politics behind it.

Bizarrely, that story ran the same day the Federal Treasurer revealed the government would be running a ‘pilot project’ to put more services online as part of their attempts to harness the digital economy.

That the Australian Federal government is looking to run some pilot projects this year is remarkable given twenty years ago, in 1997, the then Prime Minister John Howard announced all appropriate government services would be online by 2001.

Australian taxpayers would be well justified asking what has happened over the last twenty years.

It could be argued that Australian governments are not particularly good at technology projects given ongoing disasters like the current Centrelink debacle, the failure of the 2016 Census and the collapse of the Tax Office’s portal shortly before Christmas.

Probably the main reason for Australian governments’ technology failures is the lack of focus, as shown by the Digital Transformation Office barely surviving one year.

That lack of focus is even more problematic as digital transformation projects are more about changing cultures than revamping technology, often making them a decades-long process.

Without a long term commitment to projects and policies, initiatives such as the Howard government’s 1997 Investing for Growth or Turnbull’s 2015 Innovation Agenda are doomed to failure. Until Australian governments commit to longer term visions, it’s unlikely any of their digital dreams will be achieved.

 

Digital businesses’ lost tribe of managers

Business leaders are struggling to understand their digital strategies, Forrester reports.

Are senior executives lost when discussing their company’s digital strategy?

At the Huawei Connect conference this morning in Shanghai, Nigel Fenwick, a Vice President and principle analyst of Forrester Consulting, released his company’s study titled Business and Technology Leadership in a Post Digital Era.

Forrester surveyed 212 IT and business managers across selected markets in North America, Europe and the Asia-Pacific for the survey and found only four percent of business leaders were confident they understood their companies’ digital strategy.

Even more worryingly less than ten percent of business IT leaders claimed they understood their organisation’s digital strategies.

The reason for this, Fenwick believes, is the pace of change in the technology sector as managers struggle to put digital innovations into the context of the business.

Exacerbating this lack of understanding is how companies are ‘bolting on’ digital strategies to their existing business models rather than thinking about how their industries, products and markets are being transformed, Fenwick says.

There’s little new or surprising in Forrester’s report and the small and selective data set doesn’t inspire confidence in the survey’s results. It is however a good reminder of the challenges facing today’s boards and executives in understanding the consequences of a rapidly changing economy on their businesses.

Cheap solar strands coal

As the price of solar power falls, coal mining and gas shipping assets increasingly look stranded

Last week Chilean power distributors signed a contract for solar generated power at the lowest rate ever, half the price of energy from coal powered generators.

As  the cost of solar panels continues to fall, the need for coal and gas powered facilities continues to dwindle but given solar panels don’t need to be located in a central location, the nature of distribution networks is changing.

With power generation becoming more localised, communities don’t need expensive connections to power grids. In disadvantaged regions and developing nations, villages that would have to wait decades to be connected, if at all, now have a pathway to dramatically improving their standards of living.

Distribution companies that exploited their monopoly positions in providing power across wide networks are now having to reconsider the value of their expensive assets and lucrative business models.

Those countries and companies who thought high coal prices would bolster their standard of living, such as Australia, must be rueing their focus on fossil fuels. The massive investments made by mining companies and compliant governments are now increasingly looking like stranded assets.

Uber’s grand experiment

Uber’s losses raise questions of how far the loss making business model pioneered by Amazon can be pushed

Yesterday reports emerged that the icon of the disruptive economy, ride sharing service Uber, lost 1.2 billion dollars in first six months of this year.

Those losses show disruption doesn’t come cheap, although settling the damaging and costly battle with China’s Didi Chuxing will help the company’s cash burn.

Despite on track to lose at least two billion dollars this year, the company still has a substantial war chest having raised $8.7 billion dollars in debt and equity raisings over the last eighteen months.

While impressive, that war chest will only last four year at current rates and, given Uber’s already sky high 60 billion dollar valuation and the increasingly hostile Silicon Valley fund raising environment, it will be a relief to investors that the China battle appears settled.

There remains though an ongoing weakness in Uber’s business however with the company reportedly spending hundreds of millions a year in subsidies to drivers in key markets. How sustainable their business is remains to be seen.

In many respects Uber is following the Amazon example of beating down competitors by selling products at deep losses thanks to its access to capital and investors’ tolerance for building marketshare.

As we’ve seen with Amazon, that tactic has been wonderfully effective both in retail and in providing cloud services. For customers and the economy though, the reduced choices in the marketplace may end up not being in their interests.

Uber is an interesting experiment in how far the Amazon model can be pushed, for cities and states dealing with a deeply disrupted taxi and city transport network the results of that experiment may be telling.

The cost of the cloud: How the disrupters are being disrupted

Cisco, Autodesk and Microsoft’s cutbacks and pivots show technology companies are not immune from disruption

A common factor when talking to tech companies is their talk of disrupting industries, they themselves are not immune from change though.

This week networking giant Cisco announced they would cut seven percent of their workforce, nearly 5,500 employees, as the company deals with the shift to software defined networking equipment continues.

Industry commentators are warning Cisco are not alone as software and cloud based services change the tech industry with Global Equities Research’s Trip Chowdhry estimating the sector may shed up to 370,000 positions this year.

Today I had the opportunity to ask Autodesk’s Pat Williams, the company’s Senior Vice President for Asia Pacific, about the challenges facing companies transitioning to the cloud. At the beginning of the year Autodesk announced they would be cutting ten percent, over 900 jobs, as part of a structuring plan.

“I think there was a model that we had that as we moved to a subscription business that said we would see a bit of a drop in revenue and we realised our gross margins would be pressed,” he said.

“What we were trying to do was right-size the business,” Williams continued. “Sometimes you need to do that. It was a very intentional forward looking move we made.”

Autodesk and Cisco are far from the first tech companies to suffer from the software industry’s shift to the cloud. Microsoft have been probably been the business most affected by the change.

Cisco themselves have been dealing with this shift for a decade as well, with a major restructure in 2011 that saw 6,500 jobs cut.

What is clear in a transitioning industry is that Microsoft, Cisco and Autodesk are far from alone in making cuts. As Autodesk’s Williams points out, it’s probably best for managements to be doing this proactively rather than waiting for the changes to force their hands.

The stories of Cisco, Autodesk and Microsoft show all industries are facing changes. Assuming you’re safe in any sector is brave thinking.

Embracing business disruption

Pam Murphy, the Chief Operating Officer of software company Infor believes businesses have to embrace change in order to survive today’s period of disruption

“A lot of companies are trying to figure digital disruption out,” says the Chief Operating Office of Infor, Pam Murphy. “For many companies they are seeing all this stuff and thinking ‘oh my god, what on earth do I do?’. They know they need to evolve and they know they have to evolve.”

Murphy, who joined Infor in 2011 after over a decade at Oracle, has seen a lot of that change. Infor itself embraced the cloud and in the company’s has been on an acquisitions spree as it seeks to expand its product offerings.

Having dealt with so many acquisitions – eight since Murphy joined five years ago – the company has become adept at absorbing new businesses. “It does require a lot of thinking that you’re going to be respectful of that,” she says. “A lot of stuff is easy to standardise but culture is difficult.”

Another area that Murphy doesn’t see as being standardised is in developing talent. “You have to be open minded,” she says in answer to my question about encouraging women into senior roles and increasing the diversity of senior management.

Murphy’s main advice to business leaders is not to shy from the business world’s shifts, “embrace the change.” She says, “don’t think of it as being something that’s scary and threatening, get ahead of it. Embrace the fact we’re in a completely different era.”

The dangers of hands free driving

The first death in a driverless car will raise questions about their safety and regulation

Last May 7 45-year-old Joshua Brown was killed when his car hit a truck just outside Willston, Florida. His Tesla was operating in ‘autopilot mode’ and he was the first death in a driverless car accident.

Now the investigation and the speculation into the Mr Brown’s unfortunate demise begin. It’s worth watching to see how the accident will change public perception and government regulation of autonomous vehicles.

What’s notable is Tesla are careful not to recommend leaving the car to its own devices, as The Verge reports.

Tesla reiterates that customers are required to agree that the system is in a “public beta phase” before they can use it, and that the system was designed with the expectation that drivers keep their hands on the wheel and that the driver is required to “maintain control and responsibility for your vehicle.” Safety-critical vehicle features rolled out in public betas are new territory for regulators, and rules haven’t been set.

Another aspect that should concern users and regulators is Tesla’s software industry attitude towards liability and safety in dismissing the car’s flaws as being an unfortunate consequence of imperfect beta software. That may cut it in the world of Microsoft Windows 3.11 but it doesn’t cut it when lives are at stake in the motor industry.

Subverting the house rules

An Arab Spring seems to have come to the US Congress as members occupy the chamber and stream their own video footage.

It seems the Arab Spring has come to the US Congress where Democrat representatives protesting the house’s refusal to vote on gun control legislation have occupied the house.

House speaker Paul Ryan, a Republican, ordered the chamber’s TV cameras to be shut off but the occupying members responded by streaming their own media feeds through Facebook and Periscope.

Once again we’re seeing how new media channels are opening up with the internet. While they aren’t perfect, they do challenge the existing power structures and allow the old rules to be subverted.