Category: Disruption

Saying goodbye to the boxes of gold

Intuit’s plan to sell Quickbook is part of the shift to cloud computing that’s leaving old business models dead.

“No-one is making money from cloud software, in the early days everyone made money from software,” bemoaned one of the panellists at last week’s CPA Technology, Accounting and Finance Forum.

A good example of this is the US accounting software giant Intuit putting the 32 year old Quickbooks on to the market.

Intuit was built on the back of Quickbooks but today the product today makes less than 6% of the company’s revenues and under 2% of the profits. Making matters worse is the old code base is clunky, proprietary and expensive to maintain.

Apart from getting a captive – and almost certainly dwindling – client base, there doesn’t seem to be a lot to attract buyers for Quickbooks as a desktop based product in a market shifting to the cloud.

The shifting business model hurts more than Intuit; the accountants, resellers and other service providers who were making a decent income from selling or supporting the box products have seen their margins evaporate.

For users, both Intuit and the services providers moving away from the product risks leaving them and their data stranded, something every business should understand about the risks of proprietary formats.

The shift though by Intuit should be a warning to small businesses that the days of box and inhouse software are numbered and running packages on servers and desktops will soon be for large organisations or niche applications.

Almost every business is going to have to plan its move to the cloud, those who don’t are increasingly going to be left behind in a shifting market.

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Learning from the workforce of the past

A Deloitte study of past workforce changes gives us clues, but not answers on how the future of work will look

One of the constant questions posed to anyone reporting on the technologies changing the workforce is “where are the jobs coming from?”

A paper by Deloitte UK economists Ian Stewart, Debapratim De and Alex Cole titled Technology and people: The great job-creating machine looks at how technological change has affected the British workforce over the past 170 years.

While the study itself seems somewhat hard to get hold of, The Guardian earlier this week reported on what the economists found when they examined employment patterns through the rapidly changing economy of the last 150 years.

One clear shift the collapse in manual jobs, particularly farm labourers whose numbers fell from a peak of 950,000 in 1881 – 7% of the workforce – to less than 50,000 or 0.02% in 2012.

UK-agriculture-labour-employment

The decline in the employment of farm labourers shouldn’t be surprising – in 1871 the proportion of the British workforce employed in agriculture was 15% while today it is less than 1%. A graph from the UK Census office illustrates that shift.

UK-employment-infographic

It’s notable comparing the UK to the US in this respect; at the beginning of the Twentieth Century nearly half the US workforce was still working in agriculture while the Britain had been a predominantly service economy for nearly fifty years.

Even today nearly 3% of American workers are employed on farms, a number not seen in Britain since the mid 1930s.

In both countries, the late Twentieth Century saw a shift to a service economy, something illustrated in the Deloitte survey by the rise of the British barman where the proportion of workers in the liquor industry tripled from 0.2% of the workforce between 1961 and today.

UK-barstaff-workforce-proportion

That British bar employment tripled in the post World War II years probably illustrates best the rise of the consumerist culture during the late 20th Century.

What should be flagged is those transitions away from agriculture to consumerism weren’t painless, much of Britain’s economy was racked by recessions through the Twentieth Century and many of the nation’s regions were devastated by the shift away from manufacturing in the 1970s and 80s.

In the US, the transition away from an agricultural economy in the 1920s was particularly painful, Steinbeck’s book the Grapes of Wrath tells of the human costs to families displaced from their mid-west farms during that time.

That technological and economic factors have driven massive changes over the centuries isn’t new, but the fact the vast majority of today’s workforce are in jobs which couldn’t have been imagined a hundred years ago should encourage us about the prospects for the future workforce.

However, assuming the future will look like today and that employment will be largely in consumer service industries may be as mistaken of the beliefs among 1960s policy makers that manufacturing would be the future.

Even more pressing for today’s policy makers and leaders is to prepare for the pain of transition. If we are seeing a workforce shifting to new business models then there will be high community and personal costs. We need to be preparing for the pain of the shift as much as we anticipate the benefits.

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The three S’s of employee engagement

How do we engage with an always on, connected workforce?

We need to rethink how we measure performance in the workplace says Andrew Lafontaine, Senior Director Human Capital Managemet Strategy & Transformation at Oracle Australia.

As business adapts to a changing society and mobile technologies, one of the questions facing managers is the mismatch between the Millennial generation and those GenX and Boomers who make up most of the executive suite, Lafontaine sees this as been in how the younger cohort approaches authority.

“There certainly can be a disconnect between Millennials and boomers. Millennials don’t see hierarchy the way boomers see it as important,” says Lafontaine. “Boomers have ingrained view of the way they have come through the workforce.”

Breaking the old rules

Unfortunately for those older managers, their world was based on a formalised, ‘straight line’ hierarchy dating back to the days ships’ captains used flags and voice tubes to communicate.

That rigid military style worked well for nearly two hundred years of business with mail and then the telephone only reinforcing that management model. Now newer collaboration tools mean different ways of working becoming possible.

A problem with those different ways of working in teams is how performance is measured warns Lafontaine.  “What they are not measuring at the moment are what I call ‘network performance’. How workers they helping their colleagues, collaborating and working together.”

Separating home and office

With mobile technologies becoming ubiquitous it becomes harder to separate work from home life, “we working now from home and on the tram. You don’t need a nine to five workforce nad companies have to deal with and embrace the technology,” says Lafontaine.

In the context of babyboomers and GenX workers, that technology meant longer hours in the office but Lafontaine suggests things are now changing. “There other areas to measure. How are they looking after themselves? The days of babyboomers working 12 or 14 hours a day and neglecting their health or outside life are over.”

For the future company, the key to success lies in engaging their employees Lafontaine says. “A more highly engaged workforce delivers better outcomes. Engagement is the three S’s: Stay, Say and Strive”

Those S’s come down to three questions for the worker; should I stay? What should I say? and How should I strive to do a better job?

For managers the challenge is engage all workers regardless of age, the task of finding what engages and motivates workers of the computer generation is only just beginning.

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What should we call the sharing economy

What label should we give to businesses like AirBnB and Uber?

Stop calling it the sharing economy, cries marketer Olivier Blanchard in a blog post describing how the label is inappropriate and doesn’t accurately describe the imbalances in the relationships between providers, users and the online platforms that facilitate them.

The question is what do we call the business model of companies like Uber, AirBnB and the myriad other services that take providers’ time and resources – cars in the case of Uber, homes or spare rooms for AirBnB – then make them available to people who can use them, taking a commission in the process of course.

Blanchard wonders if much of the success of these companies is because America’s cash strapped middle classes are desperately trying to find additional source of income and there is very much a strong argument for that.

More importantly, is what do we actually call these businesses? While they are potentially are as exploitative as the free labour models that have evolved in the media with businesses like Huffington Post, at least they provide some type of income even if for Uber drivers the net returns may be marginal at best.

Blanchard himself suggests the Microtransaction Economy however that’s not a satisfactory label as the transactions – which may be many thousands of dollars for some AirBnB rentals – are not always small.

Maybe we should call it the downtime economy, where we’re using the time we’re not busy or when we’re not using our homes, cars or others assets to earn income. That too though doesn’t strike me as satisfactory although it does seem to address the underlying idea these services are really only intended to supplement somebody’s earnings, not be their primary livelihood.

None of these labels though are satisfactory and maybe we have to ditch the economy moniker. It’s time to start thinking about what we really should call these businesses.

Your thoughts.

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Politicians cannot save you

Australia’s retail incumbents look set for a political win, but there’s no respite from a changing market

Around the world threatened incumbents are turning to their political cronies to protect them from competition with businesses using technologies their cosy managers and shareholders never envisaged would exist.

In Australia, one of the laziest industries has been the retail sector. Long coddled by cosy duopolies and favourable regulatory arrangements, retailers ignored the changes to their markets since the web arrived in 1995.

Of the Australian retail industry probably the most cosseted of all was the department store duopoly. Protected by their market share and product licensing agreements, Myer and David Jones neglected investments in their internal systems and largely ignored the online world, with DJs even shutting down their website in the early 2000s.

Insular Australia

Eventually it became obvious to even the most insular Australian retailer that the internet was here to stay however in the meantime canny Australian shoppers had discovered buying overseas online was substantially cheaper, and much easier, than local stores.

Faced with offshore competitors that beat them on price, range and service, the Australian retailers started lobbying the Federal government to lower the threashold, currently $1000, that customs would take an interest in and add the ten percent Goods and Services Tax (GST) and various fees and duties. In the hope the bureaucracy would discourage local shoppers looking overseas.

Mistaken lobbying

The campaign to lower the GST threashold was a mistake says Ian Moir, the current Chairman of now South African owned David Jones. “It set Australian retailers back because they spent more time trying to persuade governments to do this than they did thinking about what the long term future for the business is.”

Moir was speaking yesterday in Sydney at an Australian Israel Chamber of Commerce lunch panel titled ‘Reframing retail for the digital age: The importance of an integrated approach’. Joining the DJs executve on the board were Craig Dower, the CEO of Salmat and David Mustow, Head of Retail & Consumer at Macquarie Bank.

The message from the lunch was clear – technology savvy customers were demanding more from retailers now smartphones are driving purchase decisions. “Everyone talks about Big Data and how you use it as an organisation,” observed Scottish born Moir. “Not enough people talk about the big data the customer has on their mobile phones.”

Mobile first

Moir’s view on mobile was endorsed by Macquarie’s Mustow who stated “if you’re investing in this space it’s mobile first.” Salmat’s Downer added to this with Salmat’s research that found 55% of online retail sales are coming through mobile devices.

That Australian consumers have one the world’s highest smartphone penetration rates and are also among the planet’s most avid web user only shows how poorly local retailers have responded to the web and mobile devices over the past two decades.

When Moir took the reigns at David Jones last August after Woolworths South Africa – unrelated to the local supermarket giant – the company was making a piddling one percent of its sales online. The new management has grown this three fold but it’s still trivial compared to Australians’ appetite for online shopping.

Dampening overseas demand

The appetite of overseas online sales will dampened should the proposed GST changes reducing the taxable threshold on imports to $20 be introduced as consumers deal with the bureaucracy, delays and costs of Australia’s dysfunctional customs system however Moir warns this will only be a temporary respite, “these changes only affect you in the short term, it tends to sort itself out over time.”

Indeed for retailers, the GST changes will probably only benefit customs agents and bloated ticket clippers like Australia Post along with introducing a whole range of unexpected consequences as foreign retailers and local entrepreneurs find opportunities in the new tax regime.

While the champagne may taste sweet for Australia’s retail lobbyists as they celebrate their likely win over brunch at Sydney’s exclusive Balmoral Beach Club this Sunday, their employers are going to find that swaying the politicians is the easy part – it’s ultimately the market that guarantees your success.

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Are startups like 19th Century railway companies

Today’s tech boom could be similar to the 19th Century railway boom

Are today’s tech unicorns like the 19th Century railway companies? Massive consumers of capital and ultimately transformative technologies but never in themselves particularly profitable?

In the 1840s Britain was gripped by a railway investment mania which saw 10,000km of railroads built in 1846 alone, the current network extends 18,000km.

Eventually the bubble popped after the Bank of England raised interest rates, something that should focus the minds of many of today’s investors.

The UK railway boom left a legacy of valuable infrastructure across Britain, Europe and the Americas, perhaps we’ll see a similar legacy from today’s boom.

 

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Management in an age of information abundance

How do managers and business owners deal with an age of abundant information?

The Twentieth Century was defined by abundant and cheap energy while this century will be shaped by our access to massive amounts of data.

How do managers deal with the information age along with the changes bought about by technologies like the Internet of Things, 3D printing, automation and social media?

Management in the Data Age looks at some of the opportunities and risks that face those running businesses. It was originally prepared for a private corporate briefing in June 2015.

Some further background reading on the topic include the following links.

 

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