An electrical retailer’s financial results might mark turning points in two different economies.
Today Australian electronics retailer JB Hi Fi released its annual results. They confirm what’s been becoming apparent over the last year that tablet computer sales seem to have peaked.
A plateauing of tablet sales is bad news for retailers like JB whose stock price fell by 8% on the news.
It’s not surprising that tablet computer sales have peaked as the growth had been spectacular and, unlike PCs of a decade ago, there isn’t an obvious five year replacement cycle.
That the old PC industry business model doesn’t apply to tablets is why Apple is focusing on other revenue sources like the App Store and internet of things plays such as HomeKit and HealthKit.
Once again, the industry leaders are finding they have to pivot to stay up with a rapidly evolving market.
The other notable point from JB’s management was that Australian consumer confidence is tanking, which might indicate the economy is entering its first recession in twenty years.
If it is true that the Aussie economy is entering a recession, then it might be time for the adults to take charge in a very immature government. Some of the Liberal Party’s pampered princelings may have to start earning their salaries soon.
The Global Innovation Index rates nations on their ability to adapt and compete in the global economy, the authors believe the measure is more than just economics
Last Friday the Global Innovation Index was released rating nations on their ability to adapt and compete in today’s global economy, the authors though believe the measure is more than just economics.
The Global Innovation Index is a joint venture between Cornell University, INSEAD, and the World Intellectual Property Organization which measures 81 economic factors that across 143 countries.
Its release in Sydney last week was part of the B20 conference – the business offshoot of the G20 Heads of Government meeting taking place in Cairns later this year.
European countries top the list with Switzerland, the United Kingdom, Finland and the Netherlands making up the leading five. The US and Singapore break the European monopoly at the sixth and seventh positions.
As the results indicate, rich countries have a natural advantage in the index with index scores tracking national GDP – the highest ranked middle income country is China at 29th and the leading low income nation is Kenya at 85.
Innovation index versus GDP
Kenya, and Sub Sahara Africa in general, is one of the highlights of this year’s report with with countries in the regions being nominated as ‘innovation learners’ with them performing above their expected level of GDP.
“What we find in Africa is growth rates are stabilising,” says Francis Gurry, the Director General of WIPO in discussing the report. “That creates the space for better policy and investments.”
Smaller is better
A key finding in the report is that smaller countries tend to perform better; “there’s a slight bias in the index,” says Gurry “as there’s more evenness across the economy.”
This works against larger countries like the United States while favouring countries such as Switzerland and Singapore.
Being affected by the 2008 financial crisis doesn’t help economies either; “the countries you see on top like Switzerland and the Nordic countries have been less affected than countries like Spain and Greece” says Bruno Lanvin, the Executive Director of the ISEAD Global Index.
Europe’s growing divergence
“Yet Europe remains a land of innovation,” continues Lanvin. “Europe has no choice, it is an aging economy and it has to innovate its way out.”
“A divide has been recreated within Europe, the whole European edifice has been a terrific machine for convergence. This has disappeared with the crisis where we see a new divergence.”
“We see countries like Spain and Italy, not to mention Greece, where the proportion of research and development has been decreasing which has not been compensated by private investment.”
This lack of private investment is a concern that constantly came up in the B20 discussions; despite the world being awash with capital, little is finding its way into infrastructure funding and business lending.
Falling R&D spending
Another area causing concern for the index compliers is the falling rates of research and development spending, noting that support for R&D efforts seems to have lost momentum in some countries with most growth in this area over the near future expected to take place mostly in China, the Republic of Korea, and India.
Innovation by Region
Rank in Region
GII 2013 Overall Rank
Country Name
Central and Southern Asia
1
76
India
2
79
Kazakhstan
3
86
Bhutan
Sub-Saharan Africa
1
40
Mauritius
2
51
Seychelles
3
53
South Africa
Southeast Asia and Oceania
1
7
Singapore
2
10
Hong Kong (China)
3
16
Korea, Rep.
Latin America and the Caribbean
1
41
Barbados
2
46
Chile
3
52
Panama
Northern Africa and Western Asia
1
15
Israel
2
30
Cyprus
3
36
United Arab Emirates
Europe
1
1
Switzerland
2
2
United Kingdom
3
3
Sweden
Northern America
1
6
United States of America
2
12
Canada
While the index was notable for its stability among the top ranking countries, there were stand out performers with the United Kingdom charging from tenth in 2011 to third in 2013 and second this year.
Along with ethnic diversity, the advantages of having deep, varied economies and societies is emphasised by the report.
“When you’re measuring all of these, you’re measuring the ability of a country to compete;” says Gurry. “The intensity of competition will only increase between countries in respect to both regulatory regimes but also between enterprises.”
For all the talk about the importance of innovation Lanvin sees limits to what governments can do; “innovation is not a matter that can be decreed or implemented by governments alone, government can give the right signals and create an environment.”
Creating a mindset
“In the end it is the dynamics between business, government, academia and civil society that create the right mindset for a country to become an innovator,” continues Lanvin.
Lanvin also observes that innovation is about more than technology, “clearly technological innovation will remain a critical component, but you should expect to see social innovation and political innovation.”
“When we need to address the major challenges of this planet like the environment you need more than technological innovation; you need creativity, new mindset and new attitudes.”
Business and sports reporting is increasingly being done by computers, many other middle class jobs are going the same way.
Journalists have had a tough time over the last twenty years and it’s about to get tougher.
Last July The Associated Press announced they will automate most of their business reporting. AP’s Business News Managing Editor, Lou Ferrara explained in a company blog how the service will pull information out of company announcements and format them into standard news reports.
instead of providing 300 stories manually, we can provide up to 4,400 automatically for companies throughout the United States each quarter
Ferrara admits AP has already automated much of its sports reporting;
Interestingly, we already have been automating a good chunk of AP’s sports agate report for several years. Data comes from STATS, the sports statistics company, and is automated and formatted into our systems for distribution. A majority of our agate is produced this way.
Reporting sports or financial results makes sense for computer programs; the reciting of facts within a flowing narrative is something basic – Manchester United led Arsenal 2-0 at half time, Exxon Mobil stock was up twenty cents in morning trading and the Japanese Yen was down three points at this afternoon’s close don’t take a super computer to write.
Cynics would say rewriting press releases, something many journalists are accused of doing, could be better done by a machine and increasingly this is exactly what happens.
The automation of commodity reporting isn’t just a threat to journeyman journalists though; 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 the computers are already threatening jobs – like journalists things are about to get much worse in those fields.
It could well be that it’s managers who are the most vulnerable of all; when computers can monitor the workplace and prepare executive reports then there’s little reason for many middle management positions.
This is part of the reason why the middle classes are in trouble and the political forces this unleashes shouldn’t be underestimated.
Irish Taoiseach Enda Kenny was in Silicon Valley promoting Ireland as an investment and operating location while in London the Queen hosted 350 British tech companies at Buckingham Palace.
Earlier this week President Obama hosted the first White House Makers’ Faire with over thirty inventors showing their ideas.
All of this contrasts with the Australian Prime Minister Tony Abbott’s recent North America where he touted the country was ‘open for business’ by offering mines and toll roads to Canadian pension funds.
It’s clear some countries’ leaders recognise they live in the Twentieth First Century while others are struggling with Twentieth Century.
If we want to understand how to adapt to a rapidly changing world, we could learn from our great-grandparents.
“We’re looking at a future where every aspect of our lives could be utterly different to how it is now,” declared ABC Radio host Linda Mottram in our semi-regular technology spot on Monday.
Linda’s concern was based around our talk on 4D printing and the future of design and she’s absolutely right – life is going to be totally different by the end of this century.
We won’t be the first generation to experience such massive change to society and the economy, our great grandparents at the beginning of the Twentieth were born into a world without electricity, the motor car or antibiotics.
Those who survived the two world wars and lived to a ripe old age in the 1970s saw life expectancy soar, childhood mortality rates collapse and the western economies shift from being predominately agricultural to mainly industrial and service based.
From our position, it’s difficult to comprehend just how radically life changed in western countries during the Twentieth Century.
When we wonder where the jobs of the 21st Century will come from, it’s worth reflecting that many careers we take for granted today didn’t exist a hundred years ago and the same will be true in a hundred years time.
The technology we’re using may be new, but adapting to massive change isn’t.
While the headline – which wasn’t mine – is inflammatory, there is an element of truth to it as Australian companies have become far more insular and comfortable in the last twenty years.
It wasn’t always like that, for a brief period in the late 1980s and early 1990s corporate Australia was prepared to take on the world. But something happened in the mid 1990s.
John Winston Howard
One of the key turning points was the election of the Liberal government in 1996, John Howard’s fundamental belief was that things were better in the 1950s and Australia should return to those days. He delivered.
The Australian people thought his vision was a great idea, having become exhausted by the reform agenda of the 1980s Hawke and Keating Labor governments that had opened and reinvigorated the economy.
Howard was helped by the Labor Party abandoning its reformist agenda with its successful 1993 campaign against the Liberal’s policy of changing the tax system. As George Megalogenis pointed out in his book The Australian Moment, Paul Keating’s populist victory over John Hewson demolished any appetite for meaningful reform among Australia’s political classes.
Cosy clubs
The centerpiece of Keating’s economic reforms was the compulsory retirement savings system; while the idea was good in principle, the practice of private fund managers looking after the savings has meant most of the investment has been concentrated in the top ASX stocks.
As a consequence, Australia’s top companies were relieved of the chore of answering to stroppy shareholders as their registries were dominated by their friends from Sydney’s Balmoral Beach Club and the hallowed halls of the Melbourne Club.
Domestic duopolies
Compounding that problem was another failure of the Hawke-Keating years of allowing domestic monopolies to develop on the basis that Australian companies needed a strong local footing in order to compete in global markets.
For a while that worked until Australia’s now powerful duopolies decided it was more profitable to exploit their domestic market strength rather than competing as global players. This happened around the time Keating won the 1993 election, by time Howard became PM the practice was well established.
The combination of tame shareholders and comfortable markets is why Australian corporations haven’t responding to global pressures; they simply don’t have to. Which leads us back to the conclusions of the PwC report.
Australia needs to lift its game. We are lagging behind our peers globally and are not considered a leader of innovation. The Organisation for Economic Co-operation and Development in its Science, Technology and Industry Outlook 2012 rates Australia as average against its key drivers that measure competency and capacity to innovate. Change is required.
It’s difficult to see where change is going to come from for Australia while everyone – business leaders, politicians and the population at large – are comfortable. As the long as The Lucky Country stays lucky it can afford not to invest in the 21st Century.
Uber’s fight with taxi regulators is part of a broader business disruption
I’ve a story up on Technology Spectator that pulls together Uber’s fight with taxi regulators around the world with the Australian government’s Commission of Audit.
While the story is written in an Australian context, the key message about business disruption is universal; as barriers to entry fall, no incumbent can assume they are immune from having their business upended.
For Australia, this is a particularly important message as the affluent economy is kept afloat by consumer spending underpinned by a favoured and protected housing market.
The economy though is nowhere near as untouchable as it looks; along with being way over invested in property, Australia’s industries are hopeless uncompetitive and have a cost base similar to Germany’s.
It’s an entire country ripe for disruption, it will be interesting to see if the Lucky Country’s luck holds in the 21st Century.
