Category: economy

Binary thinking in a digital world

Thinking you have to use one tool at the expense of others or make a choice between being wholly online or ignoring the Internet totally is a false, dangerous choice.

In a time when the retail industry, like the music and newspaper industries before it, is going through major changes thanks to the Internet there’s a tendency to think in black and white – that you’re either online or you aren’t.

This is a mistake as the choice between going online or not isn’t a black and white issue, it’s a matter of degrees.

A good example of flawed thinking was the announcement that Just Jeans would close 50 stores and move to online selling. This idea ignores that Just Jeans’ management has little online retail experience they would be better to be using an online presence to compliment their existing strengths and drive traffic into their stores.

A bricks and mortar store still needs online presence, even if there’s no intention to sell online. A shop or café needs a website that at least tells customers who they are, what they sell, where they are and when they are open.

For many businesses, online is a new channel and opportunity that complements existing channels. The web, and particularly social media tools, offer an opportunity to connect to customers, build loyalty and spread the word about the business.

Even the online tools themselves suffer this where we have arguments about whether a business should use one social media tool like Twitter, Facebook or LinkedIn. The real answer is you should have a presence in all of them, even though most businesses will find one channel is more effective than others.

Similarly an online business needs a credible physical presence such as real call centres, phone numbers and office contact details. Indeed the lack of customer service is the Achilles Heel of many online retailers.

A lack of understanding that there is little real difference between the online and physical worlds is shared by many in the community; the idea that what someone does online is not related to their reputation or legal responsibilities in the real world persists despite it being constantly proved wrong.

In the online world the answer isn’t usually one choice or another, it’s a matter of how one channel will help you more than others.

Thinking you have to use one tool at the expense of others or make a choice between being wholly online or ignoring the Internet totally is a false, dangerous choice.

A more sensible way of dealing with the online world for established retailers, or any existing business is to experiment with what works for their customers and markets.

It may well be that shutting down physical stores and moving online is the solution for some, but for many others it will make more sense to use what the online world does well to build on existing advantages.

For the retail industry, salvation is probably going to lie in providing service. It’s those managers and business owners that see qualified, helpful staff as an asset rather than a cost who will thrive in the next decade.

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The web’s big weakness

How a hands-off customer model may doom many of today’s social media and web services

There’s a fundamental flaw in the way the tech industry does business, that weakness could be what ultimately kills many of today’s new media, web and social media services.

AirBnB, an online home share service, is one of the darlings of the booming Silicon Valley start up sector, having recently being valued at $1.2 billion after a successful capital raising.

Like most Web 2.0 and social media businesses, AirBnB’s advantage is in the low operating costs where customer support is left to the service’s peer review and social media communities while AirBnB pockets a commission for simply making the connection between the landlord and tenant.

The flaws in this “all care, no responsibility” model became apparent last month when a lady posted a description of her house being ransacked by an errant housesitter she found through AirBnB.

AirBnB’s management responded to the article with assurances they were helping and working with their affected customer, claims which were promptly contradicted by the original victim.

To make matters worse, certain prominent members of the Silicon Valley investment and blogging communities alluded she was lying or was “batshit crazy.” Now that other stories of bad AirBnB tenants are appearing, the view this is simply the untrustworthy word of a deranged customer affected by their first such incident is looking hollow.

Failing to deal with customer problems is not unique to AirBnB, hiding behind impenetrable layers of “support” backed up by user hostile terms and conditions is familiar to anyone who has had to deal with an online service gone wrong.

Last month Thomas Monopoly found he was locked out of his Google account and had it not been for the intervention of a senior Google employee, Thomas’ problem would probably still be stuck in an endless feedback loop.

Exactly the same problem has been encountered thousands of times by other users of web mail, social media, online auction and matchmaking sites.

Many of the people running these services retort their products are free so users get the support the support they pay for – an argument conveniently overlooking that most “free” web services are based around selling customer data – but even this does not justify delivering the basic services users have been lead to expect, regardless of what a 5,000 word user agreement states.

Today’s tech startups, and many of their big established cousins in the IT industry, have the idea that customer support is an optional extra and an expense to minimised or outsourced.

In this respect they are not too far removed from dinosaur car manufacturers or some of today’s less dynamic retailers offering little in the way of customer service or after sales support.

That way of working has died as consumers have been able to go online to vent their dissatisfaction, strangely today’s hot tech start ups seem to have missed this aspect of the revolution they have helped start.

Ignoring consumer problems is exactly what’s bringing traditional businesses unstuck in the online world. The funny thing is it might bring many of the online business undone as well.

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A question of respect

Do we give our business partners the respect we’d like to receive?

All too often a discussion of business leadership descends into a series of homilies and recycled stories equating corporate warriors to ancient Chinese generals.

In a time where we’re obsessed with the shiny toys of technology, we often forget that all business is social and leadership and respect are the keys to growing a successful enterprise.

Last week’s final session of the 2011 Let’s Talk Business series was refreshingly different with David James of Sydney’s Brasserie Bread, Mike Cannon-Brookes of software company Atlassian and business mentor Chris Witt telling their stories of leading growing enterprises.

Mike and David showed how real business leadership is about entrenching values within in an organisation that fosters consistently good service and great products.

David told how Brasserie Bread treat their retail partners with generous commissions and services that encourage cross selling illustrated the key difference between smaller businesses taking the long view and the short term views taken by corporate managers.

The cross selling and commission models work well for Brasserie Bread’s retailers, the customer comes into a shop to pick up their bread order, buys a coffee while they are there and – as they discover more about the business – they become a regular.

While there’s a great difference between a bakery and software company, Mike Cannon-Brookes had a similar view about values, telling how Atlassian has the “beer test” where they ask if a prospective employee would be interesting when talking over an after work drink.

Atlassian’s main mantra though is “don’t f*** the customer”, which is notable in a business world largely dominated by the belief you give the customer the minimum you can get away with.

Both Brasserie Bread’s and Atlassian’s philosophies can be boiled down to one word: Respect.

Respecting customers, suppliers, staff and resellers is something that’s forgotten by many larger businesses obsessed with short term gains at the expense of anyone foolish or unfortunate enough to do business with them.

The current problems of big retailers can be put down to that lack of respect; for suppliers as they screwed the last cent out of their supply chains, for staff as they crudely cut numbers to achieve their performance targets and for customers who found service had become a word with little meaning in their stores.

It would be unfair to pick on the retailers though as most large organisations share that attitude of disrespecting everyone who doesn’t sit on the same floor as the CEO.

Much of these beliefs on blindly cutting costs, outsourcing service and focusing on short term KPIs came out of 1980s thinking at consulting firms and management schools.

Although the schools and consultants have updated their thinking, many business leaders are stuck in that short term model which worked well during the two decades of easy credit we’ve went through up to 2008.

Chris Witt summed this short term thinking up well with his closing comment; “Neanderthal man’s survival strategy was short term, it didn’t do him much good.”

Respecting your business relationships is the key to long term survival in these uncertain times, we need to be insuring we show the respect to our staff, supplier, customers and partners we hope they would give us.

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Picks and Shovels

A business gold rush a great time for entrepreneurs, are you prepared?

It’s often said the real money in a gold rush is made by those who sell the picks and shovels. A great example of this is yesterday’s announcement that Dealised, who provide software for group buying services, has raised $5 million in investor funding.

Undoubtedly we’re in a gold rush for group buying sites with new services being launched weekly. One thing that many observers don’t understand about group buying sites is they aren’t really technology businesses, but sales driven directory services which have more in common with the Yellow Pages or the a giveaway local newspaper than Google, Facebook or Microsoft.

Technology though is important to these businesses as they need to track and publicise their deals which is what Dealised does. By offering this as an off-the-shelf service, it frees up capital and makes life easier for the dozens, if not hundreds, of group buying services being launched around the world each week.

Reducing barriers to entry is one of the things the tech industries are extremely good at ­– as the early group buying sites like Groupon and their local counterparts have found – and it’s something that all businesses need to keep in mind.

The wave of group buying start ups is part of a broader wave of disruptive businesses that are entering all parts of our economy. As we see cloud services remove the cost of buying equipment and software, it becomes easier for new, hungry entrepreneurs to find opportunities.

Another interesting aspect of Dealise’s business model is that the business itself is a spin off from the Spreets group buying service which was sold to Yahoo!7 at the beginning of the year.

Overlooked in most of the coverage at the time was that the sale only covered the group buying operations and not the Dealise technology. This freed up the founders and their investors to focus on developing the Dealise software without the distractions of running a daily deals site with its troublesome sales staff and pesky customers.

Most importantly, it kept the software platform which is the most scalable part of the business in the hands of the founders. This has given them the opportunity to build something that can be resold to thousands of other businesses.

In the tech industry we’ve seen examples of this in the past, the best example is when Bill Gates and Paul Allen licensed their MS-DOS software to IBM rather than selling it outright which allowed a massive new industry around IBM compatible computers to develop with Microsoft getting a payment for every computer sold.

While we may not see Dealise become the next Microsoft, it’s worthwhile considering some of these lessons, certainly both the gold rush and the licensing aspects show how we shouldn’t jump for what appears to be the easiest money.

Our industries may not appear to be in a gold rush, but those reduced barriers to entry are affecting everyone from booksellers to manufacturers and café owners. Have a look at some of the software your competitors are using, it’s no longer business as usual.

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Building Innovative Cities

How do we create the communities of the future?

The New Lunatick’s Newcastle as a Smart and Innovative City forum raised an interesting question; “how do you build an innovative city?”

In putting together the Digital Sydney project, this was something we closely looked at – how does a city become a global hub of innovation in the creative, digital, financial industries?

What leaps out when studying successful industry hubs is that all have developed without government intervention; most have been an accident of history where resources have come together and have driven by a small group of like minded entrepreneurs.

Those entrepreneurs have been attracted to various regions by the area’s proximity to the natural resources, transport links and available land suited to their industry. While those requirements vary between industries, access to a skilled workforce is the common factor between all of them.

In many respects this is how the current mining boom has worked for Newcastle. Unlike the rest of Australia’s mineral fields, the Hunter Valley has a major city with a skilled workforce that understands mining and engineering.

The challenge for Newcastle – and indeed for Australia as a nation – is diversifying the economy from depending upon resource exports and domestic consumption into creating wealth from the newer, knowledge based industries.

For hubs to develop in these industries, regions need the factors identified by Richard Florida in his Rise of the Creative Classes where he found these cities offered the “three T’s” – Talent, tolerance and technology.

Australian cities like Newcastle score well on these measures but to create hubs you need a motivated group of entrepreneurs and while these exist there may not be the numbers to create a critical mass.

The main reason for this is the domestic investment structure; most Australians invest in housing and aren’t particularly inclined to invest in comparatively risky businesses, particularly those in industries they don’t understand.

Governments can help by opening their data and making procurement friendly to new and smaller businesses – on both scores Australian governments at both levels do poorly with data often being unnecessarily guarded and tendering processes tend to be skewed towards large, usually multinational, corporations.

Assistance programs can also help on the fringes however it’s important not to repeat the mistakes of the film industry where several decades of government grants and funding has resulted in a generation of film makers more skilled at navigating bureaucracies and filling in application forms than telling stories.

Where government assistance can do a good job is in bringing together the various industry groups which was the intention of Digital Sydney. Well targeted, low paperwork schemes like the Australian Technology Showcase and various trade programs can also help growing businesses.

Overall though, the development of innovative cities lies in the hands of the residents, it’s up to the inhabitants of the city, town or region to bring build the hub.

This is exactly what happened with the original Lunaticks society in 18th Century England that created the region that became known as Birmingham which was the heartland of the English economic powerhouse for over a hundred years.

While we can wait for governments or investors, building industries is about innovators, entrepreneurs and workers. It’s time to get to work.

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Newcastle as a Smart and Innovative City

In today’s modern world, success is determined by our ability to come up with unique, smart and innovative ideas. It has become the key economic driver for cities and regions as they increasingly compete with other places for attention, investment, visitors and talent.

Newcastle City Council recently released their 2030 strategic plan to become a Smart and Innovation City to help Newcastle develop a healthy, diverse, creative and resilient economy.

But, how do you create a culture of new ideas? How do you attract smart people? How do you turn an Old World City into one the World’s Smartest Cities?

On June 29 2011, The Lunaticks Society of Newcastle will host some of the most creative minds in Newcastle from business leaders to content producers for an evening of thought provocative discussion, collaboration and lots of smart ideas on how to construct a Smart and Innovative City.

Speakers/Panelists

MC: Paul Wallbank – author, tech writer and radio presenter

Featured speakers include: Greg Hall – writer and movie producer, Simon McArthur & Jill Gaynor -Newcastle City Council and Carol Velduizen – Senior Research Fellow, Hunter Valley Research Foundation. More speakers to be announced…

Venue: Delany Hotel, 143 Darby Street, Newcastle

Date: Wednesday, June 29 2011

Time: Starts 6.30pm – Ends 10pm

Don’t miss this event! Book at the New Lunaticks website.

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A tale of two conferences

How two very different events put their ideas across

Two conferences about ideas took place in Sydney last Saturday, TEDx Sydney and Social Innovation BarCamp. While both involved exploring concepts and thoughts they could not have been more different.

One was about exclusivity and elitism while the other was about a genuine exchange of ideas. Both the events tell us much about the new and old models of communication and learning.

Welcome sign to SIBSyd
The entrance to SIBSyd. Exit through the gift shop?

At the Paddington College Of Fine Arts, Social Innovation Bar Camp ­– SIBSyd – was open to anyone with an idea or who just wanted to show up a throw some thoughts around. Across town at the Everleigh Carriageworks, the TEDx Sydney offshoot of the prestigious US TED event featured high profile speakers before an invitation only audience.

Welcome sign to TEDx Sydney
Welcome to TEDx Sydney. May I see your invitation, sir?

Most TED events are exclusive and restricted you have to be qualified to attend, let alone speak and this showed in the way the audience were ushered into the auditorium and then asked to turn off their mobile phones unless they wanted to sit in the back two rows.

The speakers at TED were slick, rehearsed and had their presentations timed exactly to the minute – as you’d expect at an event where the content is carefully chosen – while at SIBSyd any of the audience could choose to speak.

Even with a speaker everybody at a SIBSyd is able to participate, with all the audience of giving their views. In the reforming education session I sat in on a quiet lady at the back of the room told her experiences of working with villagers in Chiapas, Mexico.

It’s unlikely that lady would get an invite to TEDx, let alone have the opportunity to tell her story and that illustrates the fundamental difference between the two conferences.

One is the formal, traditional one-to-many lecture from an expert imparting wisdom on an audience awed by the speaker’s knowledge while the other sees the speaker – who may be an expert – drawing out the collective wisdom of the room.

TEDx Sydney stage setup
TEDx stage ready for action

The “unconference” structure of meetings like SIBSyd probably does a better job of developing new ideas as the traditional conference TED is based upon that assumes the expert on the stage already has the answers.

Of the two types of conferences, it’s probably safe to say the collaborative “unconference” model works better in driving innovative solutions to problems. To work effectively though it needs the participants to be motivated by common issues.

The traditional TED style conferences do a better job of getting big ideas across to a broader audience and that’s probably one of the reasons why the event’s videos have been such an Internet success.

Some of the differences reminded me of British writer Paul Carr’s comments about the South By South West Conference in 2009 when he said “I really hope that next year one or two of those early adopters will organise – and I mean that in the loosest sense – a user-generated unofficial fringe conference to sit alongside the main event.” In many ways SIBSyd was the fringe festival to TEDx’s “establishment” status.

SIB Syd session in progress
SIB Syd session underway

Both have their role and probably the most worrying thing at the two events was the lack of Australia’s corporate and political leadership, with the exception of Penny Sharpe, MLC who appeared to be the sole member of Parliament attending TEDx, there was little representation from either group.

In a time of massive climate, technology and economic change that is challenging the assumptions and business models of previous generations, it’s a shame our business and political leaders aren’t engaging and listening to those outside their narrow circles.

But ideas are one thing and action is another. As journalist and enfant terrible Stilgherrian said during the day, “completely over events about ‘ideas’. We have plenty of ideas. What we need is a bit of effort put into execution.”

Hopefully out of both events we’ll see some of the ideas discussed turned into action

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