Tag: economic development

Appointing the wrong crew to your cargo cult

The folly of vague objectives is compounded by appointing the wrong team to a project, as Advance Queensland has found.

The government is hopeless says Mark Sowerby, the soon to retire Chief Entrepreneur of Queensland.

Sowerby’s views are a long way from the heady days of a year ago when it was announced he would lead the state’s startup policies.

The sorry tale is a classic tale of all parties not really understanding what they were getting into.

In Mark’s case, he admits he had little of idea of how government operates;

To be honest my experience with government has been limited and I’m going to limit it to zero after this job – but bloody hell does everyone get everything wrong.

I came in with fresh eyes and lots of hope and I am just disgusted. It’s extraordinary to me how hard it is to get the simplest things done.

Sowerby’s poor understanding of managing governments and stakeholders should have been a warning sign for Advance Queensland but they themselves really didn’t really know what they wanted, as the Entrepreneur In Chief job description says;

He will act as the state’s startup ambassador working with local, national and international entrepreneurial communities to help develop and grow Queensland’s innovation ecosystem and attract investment.

From that description it’s clear the Advance Queensland panel sees “the knowledge based jobs of the future” coming from Silicon Valley type tech startups.

Thinking an official government entrepreneur with a funds management background will create a startup ecosystem is another example of cargo cult thinking from Australian governments so it’s not surprising the appointment failed.

Despite his unsuccessful tenure, Sowerby should be an asset to the Queensland government in an advisory role given his proven skills, experience and networks. It’s a matter of putting the right people into the right roles – and understanding your own objectives.

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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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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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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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Breaking the small business drought

The small business sector is essential to the broader economy’s health and diversity but in many countries it’s shrinking. How do we reverse the trend?

In most developed countries the small business community is shrinking. What can governments and communities do to grow what should be the most vibrant sectors of their economies?

What happens when a whole industry shuts down overnight? Australia is about to find when its motor industry effectively comes to an end this week.

The fallout for the workers is expected to be dramatic with researchers reporting the soon to be laid off staff being totally unprepared for their predicament.

So worrying is the predicament of those auto workers that Sydney tech incubator Pollenizer is offering small business workshops for laid off workers.

Those workshops will be needed. One of the striking things about the research is just how few of the workers are interested in launching their own ventures despite their poor employment prospects in other industries.

australian_ford_workers_employment_intentions

While the auto workers are a group with relatively low levels of education and work experience, their reluctance to starting a business is shared by most Australians with the nation’s Productivity Commission 2015 enquiry on business innovation reporting the number of new enterprises is steadily falling.

australian-business-exits-and-entries

Despite Australia’s population increasing twenty percent since 2004, the number of new business is falling. The country is becoming a nation of risk averse employees, something not unsurprising given the nation’s crippling high property prices which puts entrepreneurs at a disadvantage.

Australia’s reluctance to set up new ventures isn’t unique, it’s a worldwide trend with most countries not having recovered since the great financial crisis.

The tragic thing with this small business drought is that it’s never been cheaper or easier to set up a venture as  Tech UK and payment service Stripe show in their list the software tools being used by ventures.

Accessibility of tools or even government taxes and regulation isn’t the barrier in Australia. As the World Bank reports, the country is the eleventh easiest place in the world to start a new venture.

In United States experience shows there’s a range of other factors at work dissuading prospective small business founders – interestingly the United States comes in at a mediocre 47th as a place to start a venture in the World Bank rankings.

A healthy and vibrant small business sector is important to drive growth and diversity in the broader economy. The challenge for governments and communities around the world is to find a way that will spark the small business communities, in a world awash with cheap capital that shouldn’t be impossible but we may have to think differently to the ways we are today.

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When government support goes wrong

Government incentives may look enticing for businesses but StartCon’s Melbourne misadventure illustrates the risks

Last year the Sydney startup and business communities were stunned by the SydStart startup conference announcing it was rebranding itself as StartCon and moving to Melbourne after the Victorian government had offered to fund the event.

At the time StartCon’s Matt Barrie and the Victorian government were most certainly in love with Barrie describing how Melbourne was well placed to be Australia’s startup centre and highlighting the lack of support from the City of Sydney and the New South Wales state government.

Sydney’s shame

In Sydney, the announcement caused a great deal of hand wringing as the city startup and tech communities worried that government neglect would see the more proactive Victorian government attract businesses and talent.

Now the friendship with Melbourne is over with Barrie publishing a scathing blogpost on the inertia and duplicity of the Victorian state government.

The tale of StartCon and its falling out of love with Victoria holds a number of lessons for businesses being tempted by the siren call of government incentives and the risks to taxpayers.

What can I announce today?

The announceable culture is endemic in Australian politics. Having announceables is absolutely critical part a ministers’ life and their careers can defined just as much by not having enough good news to announce as being victims of bad press.

In the last NSW Labor government, ministers had hard KPIs they were held to in cabinet which gave rise to Chatswood-Parramatta railway line probably being the most announced infrastructure project in history.

While the current Victorian government may not have those formal measures, Small Business Minister Phillip Daladakis is a very good player of the announceable game. He’s a man with a future in state politics.

The mistake of the StartCon organisers was to agree to public announcement before they had secured the money.

Public service thinking

I’d never heard of Dr Pradeep Phillip prior to his appointment to run LaunchVic but his previous position as secretary of Victoria’s Department of Health and Human Services doesn’t seem to immediately qualify him to run the state’s startup development agency.

His conduct, and that of his staff, in the published correspondence chain are those of classic risk averse public servants. Not a bad thing when you’re dealing hospital procurement practices but when you’re dealing with startups and new businesses it would be nice to have someone with more relevant private sector experience.

A notable part of the Victorian public service’s risk aversion is the language of the convoluted grant agreement where the state government may provide support. This, along with the classic attempt of shifting all responsibility away from the agencies, opens a lot of wriggle room for the government to get out of paying the publicly stated amounts.

Equally the use of registered mail after weeks of ignoring emails smacks of institutional backside covering. This underscores the disconnect between public servants and the business world, particularly with smaller organisations, events and startups.

The futility of government support

For StartCon’s organisers their embarrassing and terrible Melbourne experience underscores the futility of depending upon government incentives to site your business or event.

In choosing where to base a business important factors are the access to markets, labour and capital with affordable office space being another key issue. For event organisers, the access to reasonably priced venues and accomodation for the attendees – two factors where Melbourne has a real advantage over Sydney – are equally critical.

Government incentives are almost irrelevant to those consideration and really only become the deciding factor if the competing locations are equal in the other respects.

Counting the real cost

The real damage though is to StartCon’s credibility – having made the public decision to move to Melbourne with much fanfare the climb down is a humiliation – but, more importantly the event is compromised in the eyes of its Sydney supporters. The chase for government money also draws a scent of hypocrisy among a group known for its Libertarian leanings.

Equally however the Victorian taxpayers should be concerned at how their government is announcing support for businesses and events without real substance. One suspects that a fair proportion of Mr Dalidakis’ announceables have similar backstories.

More importantly Victorian taxpayers should be questioning the nature of support – with the SydStart announcement there was widespread irritation in the Melbourne tech community that a Sydney based event should get such government backing and similarly funding foreign multinationals to setup Australian sales offices in the southern state’s capital is going to do much to build the state’s tech sector.

Australian sovereign risk

Something all Australian taxpayers and businesses should be concerned about is the unreliability of governments of both complexions at state and Federal level. Too frequently promises are broken leaving companies and communities out of pocket.

The shutting down of the COMET scheme under the new Federal Labor government in 2007 and then the incoming Liberal government replacing the ALPs Commercialisation Australia program in 2013 are good examples of sovereign risk where entrepreneurs spent thousands of dollars and hours only to have the grants pulled without notice.

Innovation schemes are only one example, almost every program is at risk when a new minister, let alone government, is appointed. It would be a foolish manager or business owner who would base their financial forecasts on any Australian government policy.

As we saw in the City of Sydney elections, the real key to developing industry is to have an attractive, well serviced location with access to capital, skills and markets. Melbourne may well do that better than Sydney but it won’t be achieved by ministers bearing gifts.

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Cheap solar strands coal

As the price of solar power falls, coal mining and gas shipping assets increasingly look stranded

Last week Chilean power distributors signed a contract for solar generated power at the lowest rate ever, half the price of energy from coal powered generators.

As  the cost of solar panels continues to fall, the need for coal and gas powered facilities continues to dwindle but given solar panels don’t need to be located in a central location, the nature of distribution networks is changing.

With power generation becoming more localised, communities don’t need expensive connections to power grids. In disadvantaged regions and developing nations, villages that would have to wait decades to be connected, if at all, now have a pathway to dramatically improving their standards of living.

Distribution companies that exploited their monopoly positions in providing power across wide networks are now having to reconsider the value of their expensive assets and lucrative business models.

Those countries and companies who thought high coal prices would bolster their standard of living, such as Australia, must be rueing their focus on fossil fuels. The massive investments made by mining companies and compliant governments are now increasingly looking like stranded assets.

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