Decoding the new economy

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”

Seth 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 21^st 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 21^st 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.

Category: economy

The new economy

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