Category: economy

The real digital divide

We’re often told that there’s a divide between the “digital natives”, those who grown up with computers, and the “digital immigrants”, those who’ve had to learn about computers. In reality this isn’t true, the real digital divide is about being prepared to learn and explore the possibilities being opened up every day by the Internet and computers.

The real digital divide isn’t between the young and the old; it’s between those who are prepared to explore new technologies and those who hide from change.

We’re often told that there’s a divide between the “digital natives”, those who grown up with computers, and the “digital immigrants”, those who’ve had to learn about computers.

In reality this isn’t true, the real digital divide is about being prepared to learn and explore the possibilities being opened up every day by the Internet and computers.

I was reminded of this shortly before Christmas when talking to a group of forty year old business owners who dismissed Internet tools like Twitter and LinkedIn out of hand – “a waste of time” “just for kids” and “I tried and received Chinese spam” being a few of the objections.

The contrast is the Australian Seniors Computer Clubs Association who prove you’re only as young as the computers you tinker with. These seniors, some of whom were retired well before computers became commonplace, are prepared to explore and discover possibilities that change their lives and the lives those around them.

The forty somethings all had successful businesses and they were the first to admit mobile phones, email and websites had changed the way they work. Yet nearly half of them didn’t have a website for their own business; a statistic consistent with business surveys that find almost 50% of small enterprises don’t have a website.

In many respects these businesses and their owners are reminiscent of the handloom weavers of the early 19th Century. At first technology worked in their favour and pushed wages up but as industrialisation continued they found their skills redundant and incomes falling. Eventually their trades and businesses disappeared; which is what will happen to complacent companies and industries in today’s industrial revolution.

A similar thing is happening to society and individuals. While you won’t disappear if you aren’t using the net, those who won’t will find it harder to do pay bills, communicate and simply get things done. Eventually they’ll find themselves marginalised as not being connected will make it harder for family and friends to keep in touch.

All of this is unnecessary, it’s just a matter of being prepared to try and to give something a go. The real digital divide is between those who choose to give things a go and those who don’t.

The new economy

The final slide of Steve Jobs’ iPad launch sums up where the new economy is going. The tech and creative industries have come together and the results will be the great drivers of economic growth for the next 50 years.

The final slide of Steve Jobs’ iPad launch shows how the tech and creative industries are coming together.  The results will be the great economic drivers of the 21st Century.

Steve Jobs’ launch of the iPad was the classic  succesful Apple product launch before adoring fans however the bigger picture from the show is identifying where the world is heading as technology and arts come together.

With Apple and Jobs this is nothing new. Apple’s great success has been from incorporating well designed and Engineered product in markets where their competitors have been more on price points and often poorly implemented features.

Releasing products that work well with inuitive interfaces has allowed Apple to sell their products at a premium while their competitors in the computer and mobile phone markets have found themselves dealing with declining margins.

Regardless of wether the iPad itself succeeds or fails it shows though is how powerful the combination of good design and clever Engineering are in the new economy.

The Sleazy Carnival

Seth Godin set up a friends computer and found “the digital world, even the high end brands, has become a sleazy carnival”

carnival clown stallSeth Godin set up a friends computer and found “the digital world, even the high end brands, has become a sleazy carnival” as he clicked his way through dozens of pop ups, offers and confirmation windows.

The only real surprise is Seth can’t have set up a Windows computer for some time as crapware has been the bane of IT techs for years. At the 2007 Consumer Electronic Show Micheal Dell notoriously pointed out this crapware was worth $60 per computer.

Dell’s point was valid in one respect; if you are selling at unsustainable price points then you have to do everything you can to improve your profit margins.

At the beginning of 2010, Dell find itself locked in the low value, low margin end of the industry with a declining market share at a time when US consumers are banging shut their wallets. It’s fair to say Micheal has reaped what he sowed.

It’s unfair to just single Dell out – cost cutting, upselling and downright double dealing is endemic in the IT and electronics industry and the vendors only have themselves to blame as they trained customers to fixate on price and then struggled to claw back a decent profit.

The tech sector has betrayed its customers and only has itself to blame for the lack of trust and declining profits.

The new business tools

Probably the biggest highlight of a fast, hectic 2009 was November’s X Media Labs in Sydney which illustrated just how the world is changing as a result of new media channels, faster Internet and more powerful computers.

The organisers of X Media Labs, Brendan Harkin and Megan Elliot, describe it as “a meeting place uniquely designed to assist companies and people get their own creative ideas successfully to market, through concept development, business matching, and direct access to world-class networks of creative professionals.”

Brendan and Megan held the first event at the Sydney Opera House in 2003 but have since relocated to Shanghai. The Chinese connection was strong with the guest speakers including property developers and social media entrepreneurs.

Wang Xing, founder of Chinese social networking sites, Fanfou and Xaionai impressed everyone with the size and growth of the Chinese Internet market. It left no doubt where the eyeballs and where the wallets will be as we continue into the 21st Century.

More challenges were presented by Zheng Xaioping, founder of property developer BAZO, who went through the growth of Chinese cities and the directions government and investors are taking within those cities.

A local success was Zareh Nalbandian of Sydney’s Animal Logic who showed some behind of the behind the scenes footage of Happy Feet and a US advertising campaign for fast broadband featuring a jet engine assisted shaved rabbit. It illustrated how exciting, quirky and innovative work is being done in Australia.

To show the US isn’t out for the count, Susan Bonds, president of 42 Entertainment, showed how bringing together many strands of the online digital media tools created a massive alternative reality game for the movie Dark Knight.

Probably the most exciting presenter was Professor JoAnn Kuchera-Morin from the University of California’s Santa Monica Nanotechnology Allosphere. Her talk, a version of which is on the TED website, showed the possibilities in the new economy as arts, science and technology come together.

Not everybody has the resources of the US National Science Endowment, a big movie studio, or the Chinese government to support their projects, but as Brasserie Bread showed a few months back you can create a buzz using some of these tools quickly.

That’s the challenge for all of us over the Christmas break – to figure out how we can harness the power and opportunities the second decade of the 21st Century is going to present us.

The value of communities

Businesses are just as much a part of the community as individuals. Cherishing and growing your businesses community of friends and supporter can reap big dividends.

Sydney’s Growthtown evenings are an irregular gathering of entrepreneurs discussing challenges facing fast growth businesses, and always a stimulating night with founders telling how they dealt with issues as diverse as setting up US operations, finding investors and exiting a successful venture.

Last week’s event featured Marketing Angels’ Michelle Gamble explaining how she uses the brand pyramid to help her clients and Kylie Little, founder of Essential Baby, describing the journey from a business idea to exiting from a big business buy out.

Kylie’s story of Essential Baby’s early days resonates with anyone who has started a business after the arrival of a baby. It’s always a relief to find you’re not the only one who thought it’s possible to run a business while your blissful cherub sleeps contently for most of the day.

In many ways, Essential Baby’s story describes the dream exit for many entrepreneurs, or at least most venture capital funders, with the website being bought out by Fairfax.

Interestingly, Kylie’s tale about what happened after a big organisation bought her business has some similarities to Lars Rassumussen’s experience of Where 2 Technologies’ absorption into Google.

The cultural shock of moving from an independent start-up to being part of a bigger organisation is huge and the problems can’t be underestimated. So there’s a lesson on being careful what you wish for.

One part that shone through both Kylie and Michelle’s presentations was how important communities are to a business. It’s often easy to think businesses are stand-alone entities, proudly independent of the world around them.

In reality every successful businesses relies on groups of supporters, be they customers, suppliers, financiers or just simply fans. Businesses need communities just as the community needs them.

Communities aren’t just generated by Twitter followers, witty blog entries or clever search engine optimisation, it takes credibility, honesty and doing the right thing by those around you.

So who are your communities and what are you putting into them? You may find those groups are your business’s most important assets.

Cannes Lions: Day One

The first day of the Cannes Lions illustrated how the advertising and marketing industries are not alone in being challenged by the rise of always on consumers and employees.

Day one of what’s going to be an extremely busy week at Cannes showed how digital technologies and the Internet are changing not just the advertising industry but all sectors of industry.

Schematic’s Dale Herigstad showed, among other things, where Microsoft’s Project Natal is pointing the direction of where computer controls are going.

Being able to remotely control equipment with body movements and facial expressions is going to be a massive change for entertainment, communications and many other sectors.

This theme was expanded upon by Andy Pimental of Razorfish who demonstrated his vision of where television is going.

In Andy’s future, the game controller and console are doomed. Movement recognition like Project Natal coupled with games being on the cloud means the game industry is going to be very different in a few years time.

An interesting aspect with Andy’s presentation is that most of the technology is already available to achieve his vision, as he put it “it’s the business constraints, not technology, that limits us”.

From a presenter’s point of view, the use of mock Tweets to illustrate points was a nice touch, too.

Kevin Eyres of LinkedIn probably had the most impact. While much of the presentation focused on how LinkedIn can be used as a marketing tool, Kevin’s comments at the beginning about every individual is now  entreprenuer thanks to reduced job tenure and security really illustrated the challenges businesses and governments are going to face in the connected world.

There’s some interesting challenges for all businesses ahead, not just the advertising industry. There’s a lot more to come.

The Australian Future Summit

The Future Summit 2009 was two days of discussion on Australia’s future challenges and opportunies by the Australian Davos Foundation.

The idea is terrific – all too often Australia’s political, business and economic discussion is bogged down in soundbites and opportunism. So an event that gets people thinking beyond the next opinion poll or financial report is welcome.

While it did spark thinking, it was probably not in the way many attendees hoped.

Twitterer IRLDexter asked Suits,suits,suits… Does the style and conformity reflect the thinking?.

Sadly, the answer was “yes”.

The Future Summit showed the Australian establishment is pretty well homogeneous. There’s not a great deal of dissent among the nation’s political, public service, academic or business elites.

Probably the clearest example of groupthink was in the economic discussions. The various panels’ opinion of the future can be summarised with “Australia’s right mate; once the Chinese get their act together we’ll be back on track to a self funded, negatively geared retirement, powered by nuclear energy and clean coal”.

That’s nice, but that view really lacks vigour at the very least it’s a lazy view of Australia’s future direction. We need more heretics and more new ideas. 

On the economics front a few heretics, say a Steve Keen, might have pointed we need a plan B just in case the Chinese economy doesn’t come to our rescue.

The Future Summit is a great idea and hopefully its going to continue into the future, but to provide some real forward thinking and debate, we’re going to need more outsiders to upset the Australian establishment’s narrow view.

I look forward to next years summit. Hopefully we’ll have some heretics, entrepreneurs and younger voices to balance the establishment’s complacent conformity.

Lipstick myths

Is the lipstick theory of recession spending really true?

Is the lipstick theory really true? I’ve been hearing a lot about it lately and I’m not so sure.

The “lipstick theory” is people will spend money on small, modest priced luxuries in a downturn to make up for not being able to afford big luxuries.

It’s been used to justify everything from increased fast food sales to Belgain chocolates to expensive beer to, well, lipstick.

I recently heard it used by a software developer as the rationale for investing in a software as a service product.

But is it true?

The Economist isn’t so sure and shows there’s little correlation between past recessions and lipstick sales.

My suspicion is if it was true in the twenties and thirties, it was more because better manufacturing and distribution techniques meant a better, cheaper product could get to the market.

Even if the lipstick theory is true, it’s dangerous to assume your product is the same.

For a start, some lipsticks will do better than others, partly because of marketing and partly because their price points are smarter.

Should your “lipstick” product be successful, it might not make much money for you anyway. In the last recession we saw McDonalds and other fast food chains introduce $1 and $2 meals, we’re seeing a similar trend at the moment with sub $500 computers.

These “recesssion busters” may keep your market share up, but they aren’t going to be particularly profitable. Indeed, for the computer manufacturers, the sub $500 laptops may well be cannibalising what’s left of their profitable product lines.

The reality is a lot of the products that are claiming the “lipstick theory” will save them are really doomed. The vast majority of shops selling expensive chocolate, lingerie, beer and other pricey but non essential products are simply marking time until the effects of the popped bubble reach them.

It’s best to base your business plans on sound evidence rather than blind hope in an idea that may or may not be true and may or may not apply to your products.

Dangerous Game

Associated Press have warned they will start taking action against news aggregrators like Google. Rupert Murdoch made similar noises last week.

As Fred Wilson has pointed out, the problem for AP and News is the web is now the newstand and taking publications off the shelves is not good business sense.

We see that with the Australian Financial Review. Its position as an Australian journal of record has been diminished by Fairfax’s incompetent obsession with protecting content.

As result, other channels such as The Australian, Business Spectator and blogs have stepped into the vaccuum and eroded the AFR’s online authority.

Following the RIAA path and suing Google, the Huffington Post and any blog that dares link to their sites will backfire on the news industry just as it did on the record industry.

In many ways newspapers are even more vulnerable as journalists employed by organisations like News and AP are quick to rip stories off from blogs, web forums or MySpace and Facebook pages with little regard for permission or attribution.

I suspect it’s one legal quagmire Associated Press or Rupert Murdoch might rue becoming bogged down in at the very time their business models are challenged by both economic and technological change.

Focused growth

I woke to a BBC program discussing economic growth and if the growth rates we’ve seen in the last 50 years are sustainable.

The real question is what sort of growth.

Much of that growth, particularly in the last fifteen or so years, has been a debt fueled binge on household goods and speculative assets.

Perhaps what we’re returning to is sustainable growth, where the economic engine is provided by things like improved health care, business productivity and real innovation.

Do we really need three thousand mile Caesar salads, three cars and a DVD in each bedroom to be the drivers of our economy?

Motivation

I was listening to a speaker yesterday describing the difference between public sector and private employees.

An interesting point was that the motivations are different; public sector staff are more motivated by a work/life balance while private sector workers are more motivated by money.

This started me thinking about recent blogs I’ve read by Valerie Khoo and Seth Godin regarding the motivation of Wall Street bankers and entreprenuers.

The question of money motivating people is vexed and I suspect overstated. As Seth says in his column, once you’ve an income over a million or so dollars money really isn’t that important; it’s all about status.

A point made by yesterday’s speaker was when he managed scientists he found most researches care about about peer approval. Money matters far less to them than appearing at conferences, presenting papers and being recognised for their hard work and discoveries.

In a strange way, that’s the real explanation for the financial industry’s massive salaries and bonus. The dollar amount is simply a yardstick to measure one’s status. The bigger the yacht, house and birthday party you can afford, the more recognition you have among your peers.

Which brings me to entreprenuers. Unlike Valerie, I don’t think business builders are interested soley in amassing banker like piles of cash. The cash is nice, but they are more interested in doing great things with their businesses or invention.

Cash is a useful measure and it’s nice to have some spare, but that’s as far as it goes. Far more important for most people is the recognition of their peers, security of their families and the satisfaction of a job well done.

Why small business will be the winner from this recession

An interesting post by Peter Bregman on the Harvard Business Review;

http://blogs.harvardbusiness.org/bregman/2009/03/why-small-companies-will-win-i.html

While I agree with the sentiment and Peter’s conclusion, I think there’s a more compelling, fundamental reason why small to medium businesses will be stronger when the world economy recovers.

Responsibility.

The notable thing about the current collapse is the total absense of repsonsibility from those who created the problems. From the overpaid villains of AIG through to the politicians and regulators who, at best, stood on the sidelines and allowed the excesses to happen.

The main cause of this is because managers have become isolated from the consequences. They take their pay packet, and their fat bonuses, home regardless of the shareholder wealth they destroy.

With small to medium business the owners and managers have to deliver the service they are paid to do. Otherwise the business goes quickly broke along with the proprietors.

Big business grew big because they had the technology to do so. They only big because they had the market and political power to protect their position.

Technology levelled the playing field between small business long ago, the current market turmoil and the political changes that will follow will strip most of big businesses’ advantages.

Which will leave the well motivated, well managed and responsible companies to succeed.

Only a few of these will be big businesses.