Category: economy

Crunching the middle classes

While the discussion around workplace automation has focused on ‘blue collar’ jobs, middle class occupations are those most likely to be affected in the near future.

This piece originally appeared in The Australian in July 2014. I’m republishing it here given the recent future of work related posts.

For the past four decades it’s been the working class that has suffered the brunt of the effects of globalisation and automation in the workforce. Now machines are taking middle class jobs, with serious implications for societies like Australia that have staked their future on white collar, knowledge-based service industries.

Yesterday, the Associated Press announced it was replacing business journalists with computer programs, following sports reporting where algorithms have delivering match reports for some years.

Some cynical media industry commentators would argue rewriting PR releases or other people’s stories — the model of many new media organisations — is something that should be done by machines. Associated Press’ management has come to the same view with business data feeds.

AP’s managing editor Lou Ferrara explained in a company blog post how the service will pull information out of company announcements and format them into standard news reports.

Ferrara wrote of the efficiencies this brings for AP: “Instead of providing 300 stories manually, we can provide up to 4,400 automatically for companies throughout the United States each quarter.”

The benefit for readers is that AP can cover more companies with fewer journalists, the question is how many people can afford to read financial journals if they no longer have jobs?

Making middle managers redundant

Many of those fields that cheered the loss of manufacturing are themselves affected by the same computer programs taking the jobs of journalists; any job, trade or profession that is based on regurgitating information already stored on a database can be processed the same way.

For lawyers, accountants, and armies of form processing public servants, computers are already threatening jobs — as with journalism, things are about to get much worse in those fields, as mining workers are finding with automated mine trucks taking high-paid jobs.

Most vulnerable of all could well be managers; when computers can automate financial reports, monitor the workplace and make many day-to-day decisions then there’s little reason for many middle management positions.

Removing information gatekeepers

To make matters worse for white collar middle managers, many of their positions are only needed in organisations built around paper based communication flows; in an age of collaborative tools there’s no need to gatekeepers to control the movement of information to the executive suite.

Irish economist David McWilliams — his television series on the rise of the Celtic Tiger, The Pope’s Children, and the causes of the Global Financial Crisis, Follow The Money, are highly recommended viewing – last week suggested that the forces that disrupted the working classes in the 1970s and 80s are now coming for middle classes.

“The industrial class was undermined by both technological change and globalisation, but rather than lament this, many people who were unaffected by this social catastrophe labelled what happened from 1980 to 2010 as the “inevitable consequences” of global competition.” Mc Williams writes.

Those ‘inevitable consequences’ are now coming for the middle classes, asserts McWilliams.

On the right side of progress

While this is sounds frightening it may not be bad for society as whole; the Twentieth Century saw two massive shifts in employment — the shift from manufacturing to services in the later years, and the shift from agriculture to city-based occupations earlier in the century.

A hundred years ago nearly a third of Australians worked in the agriculture sector; today it’s three per cent. Despite the cost to regional communities, the overall economy prospered from this shift.

Answers in the makers movement

The question today though is what jobs are going to replace those white collar jobs that did so well from the 1980s? The Maker Movement may have answers for governments and businesses wondering how to adapt to a new economy.

Two weeks ago President Barack Obama welcomed several dozen leaders of America’s new manufacturing movement to a Maker Faire at the White House, where he proclaimed “Today’s DIY Is Tomorrow’s ‘Made in America'”.

In Singapore, the government is putting its hopes on these new technologies boosting the country’s manufacturing industry in one of the world’s highest-cost centres.

“The future of manufacturing for us is about disruptive technologies, areas like 3D printing, automation and robotics,” Singapore’s Economic Development Board Managing Director Yeoh Keat Chuan told Reuters earlier this year.

Britain too is experimenting with modern technologies, as the BBC’s World of Business reports about how the country is reinventing its manufacturing industry.

Tim Chapman of the University of Sheffield’s Advanced Manufacturing Research Centre describes how the economics of manufacturing changes in a high-cost economy with a simple advance in machining rotor disks for Rolls-Royce Trent jet engines.

“These quite complex shaped grooves were taking 54 minutes of machining to make each of these slots. Rolls-Royce came to us and said can ‘can you improve the efficiency of this? Can you cut these slots faster?'”

“We reduced the cutting time from 54 minutes to 90 seconds.”

“That’s the kind of process improvement that companies need to achieve to manufacture in the UK.”

While leaders in the US, UK and Singapore ponder the future of manufacturing, Australian governments continue to have faith in their 1980s models of white collar employment — little illustrates how far out of touch the nation’s political classes are with reality when they proclaim Sydney’s future as an Asian banking centre or Renminbi trading hub.

Old business ideas

In the apparatchiks’ fevered imaginations this involves rooms full of sweaty white men in red braces yelling ‘buy’ into telephones as shown in 1980s Wall Street movies. In truth, the computers took most of those jobs two decades ago.

As McWilliams points out, the dislocations to the manufacturing industries of the 1970s and 80s were welcomed by those in the professions as the inevitable cost of ‘progress’.

Now progress might be coming for them. Our challenge is to make sure we’re on the right side of that progress.

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Sydney’s digital humiliation

Google’s decision to pull out of Sydney’s White Bay startup hub project throws the NSW government’s tech industry plans into disarray.

It’s hard not to see Google’s decision not to move the mooted digital hub at Sydney’s White Bay as nothing short of a humiliation for the New South Wales state government.

The White Bay project is the centrepiece of the NSW government’s startup tech startup strategy and Google were hoped to be the anchor tenant for  the refurbished power station that’s been abandoned for over thirty years.

With Google’s Sydney office currently overflowing and its staff numbers expected to increase from around 1500 today to 10,000 over the next few years, the White Bay precinct with its cathedral like power station made some sense.

For the startup community, having something similar to the London Google Campus would have been a valuable part of the city’s ecosystem.

However the location is in a traffic blackspot served by a woefully inadequate and unreliable bus service with a series of major road projects planned to start in the neighbourhood over the next five years which forced Google to rethink their plans.

Now it looks like the White Bay project getting underway this year is doomed and meanwhile the Victorian state government is spending big to attract tech companies to Melbourne.

This is far from the first time the NSW government has had ambitions for a digital hub and again a project stumbles in the face of poor planning by the NSW government.

We don’t know if the Victorian government has made an offer to Google yet, but it wouldn’t be surprising if they have. It could be New South Wales is about to pay the price for its lack of vision and forethought.

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ABC Brisbane on the future of retail

Brisbane’s largest shopping mall reopening is an opportunity to examine the future of retail

This morning I’m talking with Steve Austin on ABC Brisbane about the future of retail as the city’s biggest shopping mall opens.

What does such a huge complex mean to the local economy and is it sustainable as the retail industry evolves?

Having had a massive upgrade, we can be sure Westfield Chermside will have plenty of technology to help customers spend money and we covered some of the ways modern retails have to understand consumer behaviour and predict what individuals will spend.

Prior to the segment (which starts around the 60 minute mark), Steve took calls from listeners about how retail has changed in Brisbane over the past fifty years.  The demise of fondly remembered department stores is a reminder of how the sector changed as consumer behaviour changed over the last half of the Twentieth Century.

 

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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.

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How to reinvigorate a stale economy

A lack of collaboration is holding Australia’s economy and innovation back, a panel at Sydney’s Ad:Tech believes.

What has gone wrong with Australian innovation? For a nation so wealthy, it’s remarkable how poorly the country performs globally in terms of bringing new products or technologies to market.

At Ad:Tech Sydney yesterday, The Great Australian Innovation Fail panel discussed what has gone wrong and what can be done to get the nation back to a position more in line with its comparative affluence.

Boasting a range of digital media veterans and startup founders, the panel was far from a group of muttering naysayers. Although all but Fleet Systems’ Flavia Tata Nardini were distressed at the failure of Australia’s innovation agenda and the country’s general disdain for new businesses and technologies.

Michael Priddis, the CEO of research and development consultancy, Faethm,  pointed out that automation and artificial intelligence are not the future but the present and the job losses are happening now across industries.

Caitlin Iles, founder of XChange, added that she believes the estimates of nearly fifty percent of Australian jobs being lost to automation are actually understating the effects and it’s more like 90% – “a doomsday statistic” – which is something that Priddis endorsed in observing how the mining industry has automated in the past decade.

The employment shifts are being ignored by governments, says Beanstalk Factory’s Peter Bradd. “They have to get their heads out of the sand. We need to be supporting workers in threatened jobs to reskill. That’s just not happening at the moment.”

Australia’s underperformance is stunning when you consider tech startup exits, says the Information Industry Association’s Tony Surtees. Unsurprisingly Silicon Valley dominates the global statistics with over 47% of the global value with London, Los Angeles and Tel Aviv following. Sydney was at the bottom of the table with only .01% of value.

The value of exits is a problem, but that is more about the capitalisation of startups and may be changing. A bigger problem lies in how Australia’s corporate sector innovates and engages with new technologies.

Corporate Australia’s failure to engage is shown in the OECD ranking the country at 81st globally in ‘innovation efficiency’, while the nation is tenth in inputs it fails dismally in applying those inputs into outputs.

This is reflected in corporate Australia’s failure to compete globally outside the mining sector. Basically Australian executives have little desire in international markets and most have no interest in engaging with researchers, universities, innovators or entrepreneurs.

“People don’t like to collaborate,” says Peter. “They want to keep everything to themselves.”

“The CEOs of Australia’s top twenty companies need to get together with CSIRO and the universities and fix this problem. There’s money on the table.”

Whether Australia’s business leaders are prepared to pick up that money, or they’re happy and comfortable with their lot is probably the question of whether Australia can start to pull its weight in the innovation stakes.

“In ten or fifteen years we’ll be screwed if we don’t,” concludes Michael.

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Building digital communities

Developing digital and startup communities starts with the locals, not with government.

“When is the government going to build a startup hub in the Hills District?” Asked one of the audience following the Meeting The Future Head-on panel.

The question was directed at Karen Borg, the head of Jobs for New South Wales, whose marquee program is the establishment of a startup hub in central Sydney.

It’s not an unexpected question, placing a taxpayer funded project in the heart of the city risks raising the ire of suburban and regional voters who perceive the less advantaged areas being neglected while the rich are favoured.

The limits of government

Of those areas in Sydney and New South Wales, the Hills District is far from the poorest or disadvantaged at all so the question is how can an affluent community establish itself as an digital, or industry, hub.

It’s likely the government won’t have much influence in what areas will become hubs, Silicon Valley’s success was largely an unintended by-product of massive cold war and space race spending while most other regions have been more due to the accessibility of suitable skills, raw materials and transport links.

So the obvious answer to the question was ‘don’t wait for government’. Which leads to asking what can communities do when they want to create a digital community.

Understand what you have

The first step is to identify the strengths your community has. Which business are doing well and what does the region have in the way of education, major industries, logistics and communications?

It’s hard, if not impossible, to build an industrial centre from scratch – and rather pointless if no-0ne in your community doesn’t have the skills or inclination – so knowing what you have is essential.

Having mapped out the landscape and understood where your community’s strengths lie it’s time to start talking.

Get everyone talking

Once you understand who are the leaders, who has the skills and who has the capital in your community, it’s time to get them talking.

A key lesson in setting up the Digital Sydney initiative was that many of the groups didn’t know of the others’ existence so one of the key aims of the project was to let the industry find out about each other.

Stimulating the growth of local networks is probably the easiest things a community can do to build a local industry hub.

Find a focal point

Having a place to get together helps build that community, this is where local governments and chambers of commerce can come into play.

Bringing the broader business community into the conversation has the benefit of widening the base and getting local services companies – the web designers, accountants, lawyers, etc – into the emerging sector which in turn grows the ecosystem.

That focal point doesn’t have to be a massive startup or innovation hub like the Jobs for NSW project, it could be a regular event like a coffee morning, Friday drinks or a business drop in centre.

Engage the stakeholders

While governments can’t create these ecosystems, they can help. How San Francisco attracted the tech community into the city from Silicon Valley and London’s support of Silicon Roundabout are good examples.

London’s startup renaissance is an interesting case study in itself with many attributing Google’s Campus as being the catalyst for the sector’s growth.

At a local level providing an environment for collaboration and starting businesses – such as rate relief, space for events or resource centres – can help while at the the state and national level education and long term industry policies will help.

The corporate and academic sectors are important too, both with investment, skills development and supporting growth sectors.

Don’t wait for government

By definition governments are risk averse, which is not a bad thing as they are spending taxpayers’ funds, which means they are unlikely to lead these projects. As a consequence it’s up to the business community to develop the local ecosystem.

Once there are successes and a public profile, governments will follow. Often though that support will be late and misdirected.

Ultimately, it comes down to the community itself being what it wants to be – it’s up to the community to create the environment that encourages growth in whatever sector they think is right.

So stop waiting for government and start talking with your local business and community leaders about what they think are your region’s strength and vision.

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Futureproofing your business

Having a global mindset and maintaining a lean operation are the keys to small business success

As part of the Meeting the The Future Head-on event in Sydney tonight I thought it may be worthwhile to list down the key points I’ll be making about future proofing businesses in these times of change.

Reading the Jobs for NSW report, it’s telling that 70% of the state’s jobs are in inward facing industries and for the main part they are losing competitiveness. That leaves them exposed to international competition and automation.

It’s easy think that many domestic services business – which make up the bulk of Australia’s small business sector – are immune from competition but the example of how Uber has upended the taxi industry is an example of how even the most protected sectors are still vulnerable.

Focus on the customer

Over the last twenty years Australia has sleep-walked into becoming a high cost economy and most Australians still seem in denial about just cripplingly expensive the country has become.

Four years ago this blog posted on how Sydney was only second to Zurich as the most costly place in the world to base a startup.

There’s nothing wrong about being as expensive as Switzerland or Germany or Japan, but to compete globally it means offering high value goods and services. The easiest way for a smaller or high growth business to do that is to focus on providing stellar customer service.

Being better than the bloke next door is not good enough, that service has to compare with the best in the world in your sector.

Keep the business lean

Yesterday’s post looked at how corporations are outsourcing, the same applies to smaller businesses. Anything that doesn’t directly involve customers should be outsourced or automated.

For smaller businesses, shifting to modern payment, banking and accounting systems is relatively straightforward and setting up automation within those applications is easy.

Similarly any employment should be virtual unless it is directly involved in serving, supporting or selling to customers.

Adapt quickly

Not only is it important to keep the business lean financially but also in mindset. In recent years the tech startup community has adopted the Lean methodology and adapted it to their much volatile world.

That startup thinking is useful for non-tech businesses as it encourages a company to be far more responsive to market or economic shifts along with identifying product lines or ideas that aren’t performing.

Invest in the business

One of the biggest weakness for Australian businesses of all sizes is they are undercapitalised – even the biggest businesses tend not to retain profits and give them back as dividends to shareholders.

From a small business perspective this is understandable as the high cost of living in Australia means proprietors have to pull out an income to pay their million dollar mortgages in Sydney and Melbourne.

However what this does mean is that businesses are chronically undercapitalised resulting in them not spending enough on equipment, technology or staff training.

If you’re making a profit, try to put as much back into the business as possible and if you need more find an investor who shares your vision for the venture.

Looking global

Probably the most depressing thing about Australia in 2017 is just how insular the nation’s economy has become in the last twenty years. In New South Wales export related jobs have fallen from 32% of the overall workforce to 29% and the slight growth in tradeable services is entirely due to the education sector.

Even if there’s no intention to export, understanding the global trends and benchmarking performance against international leaders is one of the best safeguards for a business wanting to survive over the next twenty years.

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