Tag: government

Are small business owners whingers?

Too many businesses are blaming others for their problems.

People of the same trade seldom meet together, even for merriment and diversion, but the conversation sends in a conspiracy against the public, or in some contrivance to raise prices.” Adam Smith – The Wealth of Nations.

At a meeting with the state’s Small Business Commission I was once again reminded of Adam Smith’s words – that business owners will try to seek whatever opportunity they can to raise prices and whinge when they can’t.

Over the last few months I’ve heard business owners complain the government doesn’t do enough to protect the quality of their imports, give them more onstreet dining permits, stop their neighbours from having onstreet dining permits and, my favourite of all, regulating discounts offered on group buying websites.

Restauranteurs are complaining their customers don’t appreciate the cost of running a business – which is true, but it isn’t the customers problem.

A spectacular example is the anti-carbon tax propaganda where local businesses are displaying letters from a political party claiming their prices will go up and one franchise chain was dumb enough to even write down their plans to blame price rises on the new tax.

We also have the ongoing narrative that local councils – particularly those controlled by Green or Independent groups – are “anti-business” and killing commerce through unfairly enforcing parking rules and building bicycle lanes. Something that nicely fits the talking points of the Corporatist political parties that anyone who isn’t endorsed by a major party is “a dangerous radical”.

The best of all though is the ongoing campaign to eliminate the GST and import duties threshold for overseas purchases, which claims all the problems of the nation’s retailers would be solved if customers were forced to wait a week a pay a couple of hundred dollars in administrative fees.

Some of these gripes are fair – some councils are unreasonable (interestingly usually in areas where local government is seen as a stronghold a big party), the current tax rules are unfair and there are truly stupid people deeply discounting on group buying sites – but most of them are just excuses.

Business is always tough, if it wasn’t everybody would be doing it and taking it easy.

If all you can do is whinge about prices, your council, the government, your competitors, staff or your customers then maybe you should think about getting a job or at least taking a holiday.

 

Can Sydney become a smart city?

What are the challenges facing building a down under entrepreneurial culture?

How does a city become smart? That seems to be the question of the moment as countries and cities around the world try to figure out how to catch a little bit of Silicon Valley’s magic.

As part of the 2012 City Talks series, the City of Sydney hosted a discussion on how the city can become a smart city;

Sydney is bursting with talented, creative and forward-thinking people. How can we harness the energy of government, education, businesses, media, and creative thinkers to create space for innovation?

While it’s questionable that a “creative space for innovation” is a worthy objective – albeit laden with buzzwords – it’s certainly true that Sydney, along with other Australian cities, has the components to be a entrepreneurial centre, the question is how does the city harness the various talents across the different sector.

Working to advantages

Rather than aping Silicon Valley, New York or Ireland all cities should be exploiting their natural advantages. Fast Company Magazine recently looked at how Oklahoma City has advantages over its bigger cousins in New York and California.

For Sydney, and Melbourne, those strengths include an educated, multi-cultural workforce with first world legal systems in a similar time zone to the world’s major growth markets.

One of the tragedies in Australia’s marketing over the last twenty five years has been the failure to mention the ethnic diversity of the nation. This is huge competitive advantage that is barely being discussed.

What can governments do?

At the Sydney City Talks event, Lord Mayor Clover Moore said that creating a smart city requires “the same incentive to be given to innovators and creatives as is given to property investors and mining companies.”

That change requires state and Federal governments to change laws and businesses, particularly banks, to pick up on those price and policy signals.

Education too needs reform although this needs real consultation or we’ll end falling for short term fads or copying the damaging anti-teacher jihad that has infected the US.

A welcome change for many Australian innovators would be changes in government procurement policies as currently all levels of government prefer to deal with the local offices of large multinationals. As the Queensland Health Department debacle shows, these organisations are often less competent than local providers.

Making those changes though will require major reforms to policies and laws, something that neither major Australian political party at any level has the courage or vision to do.

That the NSW Digital Action Plan is now in its thirty-first draft speaks volumes about the inertia among the city’s, state’s and country’s political and business leaders.

Ditch the Silicon

Probably the first failure of imagination is the “silicon” tag – US entrepreneur Brad Feld skewers this nicely in his blog post on The Tragedy Of Calling Things Silicon.

Sydney has already has a group called “Silicon Beach” which has spread out to Melbourne and the Gold Coast and it’s interesting that both Google Australia’s CEO and Engineering head want to co-opt the name.

On of the suggestions was “Silicon Banana” a tag which brings to mind the phrase “kill me now please?” to anyone already uncomfortable with the ‘Silicon’ label.

The “Silicon Banana” idea comes from the curved shape of Sydney’s ‘digital heartland’ which curves from Darling Island to the west of the city and curves around the edge of the city centre through Surry Hills across to the film and television facilities at Fox Studios.

Describing Sydney’s centre of innovation as lying within the ‘banana’ illustrates the lack of thinking outside the current app and web mania. It also neglects the bulk of Sydney, particularly those parts of the Western Suburbs where languages such as Mandarin, Cantonese, Korean, Vietnamese, Arabic or Hindi are spoken.

Once again we neglect those assets because they aren’t white, Anglo or living in the prettier parts of the city.

Does it have to be Sydney?

We should keep in mind that the Silicon Valleys of the past haven’t been the biggest cities – Silicon Valley itself is barely a city and San Francisco is not one of the US’ biggest cities.

It’s quite possible that an Australian centre of innovation could be any one of dozens of smaller towns such as Geelong, Wagga or Cairns.

The problem in Australia is, once again, property prices. Compared to the US or Europe, housing and office rents aren’t substantially cheaper outside the big cities unless you’re prepared to move to seriously blighted parts of the country.

Spinning the wheels

Probably the most disappointing thing of the ‘smart city’ discussion is just how bogged down we’ve become – there was little in the City Talk that wasn’t being spoken about five, or even ten, years ago. Things have not moved on.

Creating a smart city isn’t about picking winners among industries, suburbs or groups. To really be smart we have to give the opportunities for clever people to succeed.

Simply jumping onto today’s technology fad or mindlessly aping Silicon Valley is to squander our advantages and not learn from the mistakes of others.

The real worry though is just how little progress is being made in seizing today’s opportunities. It doesn’t bode well for tomorrow’s.

Are the Olympics a curse for the host city?

Do the Olympics damage the hosting country’s businesses and economy?

With just over two months until the start of the London Olympics, the inevitable cold feet about the wisdom of the project have started. Vanity Fair details the convoluted bidding process while Business Insider gives the 32 reasons why they think the 2012 Olympics will be a disaster.

Conventional wisdom is the Olympics leaves the host city – and often the nation – in a collective emotional, if not economic, depression.

In the case of Athens it may even be an economic depression, although it would be drawing a long bow to suggest the 2004 Olympics are responsible for the economic predicament Greece finds itself in today.

But is true that the Olympics are “cursed”? Or is the truth more complex than that?

For cities hosting the Olympics, the core problem is the size of the event with the 2012 games expecting 10,000 athletes from 182 countries in over 300 competitions. The Olympics are several orders of magnitude bigger than any other comparable sporting event such as the FIFA World Cup.

Given the size, it’s not surprising host cities suffer an Olympic hangover – there is no way any country, even China, can sustain the frantic hyperactivity a host city goes through in the years of preparation.

China is a good example of an economy that didn’t suffer after the Olympics and the event was more a proclamation that the country had arrived as a global power.

This is common with successful Olympics – Spain in 1992, South Korea in 1988, Japan in 1960 and arguably Australia in 1956 – were all turning points for those countries and the games announced their new position in the world.

Australia though is an interesting case with the two Olymipcs they have hosted,while the 1956 Olympics did change Melbourne, and Australia’s, self image the story is different for the 2000 Sydney event.

In the run up to the 2000 Olympics Sydneysiders, like myself, were sceptical. The city couldn’t run a decent railway for crying out loud, so how could we expect to run a decent Olympic games?

All the scepticism vanished on the weekend of 20th August, 2000 when the blue line marking the marathon route appeared across the city. It was as if a switch had been flipped; the few remaining doubters skipped town and everyone else had a party.

The optimism in Sydney and Australia at the end of the games was clear; the country could pull off the world’s biggest event and the opportunities were boundless.

But Sydney and Australia squibbed it – rather than building on the Olympic success and the preceding decade of reform, the nation looked inwards, decided to invest in new kitchens and today the country is more dependent on mineral exports than any time since the 1850s gold rush.

Much of the blame for this can be put on Australia’s political establishment, specifically two men – Prime Minister John Howard and NSW Premier Bob Carr.

Both men were, or are, very effective tactical politicians who were good at winning elections but were by no means visionaries or nation builders was not their thing. So the opportunities presented to Australia in the early 2000s were squandered on Carr’s short term opportunism and Howard building his middle class welfare state.

There’s no reason why there should be an Olympic curse, for some cities it’s a timing issue. For Athens the economic cycle was against them while politics damaged the Olympics of the 1970s and 80s.

On the other hand for cities like Seoul, Tokyo and Barcelona the Olympics were a coming of age for a growing country.

The challenge for Boris Johnson and David Cameron is to translate London’s Olympics into building Britain’s confidence. While the economic tide seems to be against them, much of their political legacy will be judged against on how well they do.

Depreciating the future

We’ve become used to not planning for necessary costs. Will it eventually hurt us?

When I wrote my first book back in 1998, one of the things my editor and I did was look at the cost of buying and maintaining technology.

Regardless of how we chopped the costs up, it came up consistently that the purchase cost of a personal computer was around a third of the Total Cost of Ownership (TCO).

The TCO concept is something forgotten by people – be it a minister announcing a billion dollar purchase of jet fighters, a CEO boasting how he’s opened a hundred new outlets this year, or a family buying an investment property.

It was bought sharply into focus for me when one of my kids claimed he couldn’t use his government provided school laptop because the IT guy didn’t have the repair software to fix a problem.

Despite millions being spent on providing these computers, little has been allocated to maintaining them.

This is typical of the public education sector, early in the adventure of building a computer support business I learned that services to schools and universities were fraught with difficulties as many would infrequently receive a fixed amount for capital expenditure but nothing for ongoing maintenance. You see this in the conditions of buildings on many campuses.

Forgetting operating and support costs is something we all fall for.

Strangely motor vehicles are the only area we consistently factor in maintenance and running costs, probably because we get the fuel price shoved in our face every time we take the car for a drive.

While computers are becoming disposable items just like fridges and TVs were maintenance isn’t so much an issue given most last five to ten years before needing expensive repairs, its still true for many capital items.

There’s another aspect to forgetting costs – depreciation.

Depreciation allows us to factor in the declining value of our business assets yet I keep meeting people who treat depreciation as income or even an asset in itself. This is particularly true among real estate investors who prefer to buy newly built apartments for the higher depreciation deductions they can claim against tax.

Bizarre stuff and true bubble thinking where people think operating losses will be offset in the medium term by capital gains.

One of the aspects of 1980s thinking is that business costs like training and maintenance can be palmed off elsewhere or infinitely deferred. That isn’t the case.

In society and business, we’re seeing the effects of pretending these costs don’t exist. Somewhere in there lies opportunity.

When taxpayers hearts sink

Outsourcing can be a good thing, but governments often get it wrong.

Nothing is sadder than a government or business that believes it will gain huge savings through outsourcing.

Part of the 1980s management mindset is that outsiders can do a job better and cheaper than existing staff. Almost always this is proved to be expensively wrong.

The announcement the New South Wales Government will outsource Sydney Ferries is a good example of this. Media reports claim the “government is hoping to save hundreds of millions of dollars over the next decade.”

Good luck with that. As the people of Melbourne found when the Victorian government outsourced operations of suburban trains and trams the levels of service remained poor, subsidies increased and new level of bureaucracy developed to manage the disconnect between a private operator running a service accountable to the public.

Advocates of outsourcing always overlook the cost, time and skills involved in supervising contractors.

This is something the banks found in the early days of offshoring services as the claimed massive labour cost savings by moving operations to the developing world were offset by higher supervision costs.

Governments have a bigger problem with outsourcing as the public service generally lacks the contractual and project management skills to effectively specify and supervise major service outsourcing contracts.

A good example of this is the Royal North Shore Cleaning contract where the hospital has seen a fall in hygiene levelsas the contractor attempt to meet their KPIs under an agreement that has been designed primarily to save the area health service money.

Focusing on cost savings when outsourcing is almost always a recipe for failure. In both business and government its rare that a function or operating unit is so badly managed that savings offset the increased management expenses.

This isn’t to say outsourcing isn’t always appropriate. Sometimes those savings are achievable – albeit not as often as proponents claim – and outsourcing can deliver skills that the parent organisation lacks.

Which is another concern about the Sydney Ferries outsourcing. The Sydney Morning Herald article referred to above says the following about the CEO of the winning consortium.

Mr Faurby, who has more than 20 years maritime experience, has never run a passenger service before. But he said he understood what it would take to improve Sydney’s ferries.

”It doesn’t really matter very much if it is a towage, tug company, or a container shipping company, or for that matter a ferry company … what matters is that you have the competencies to run it in an efficient, safe and effective manner.”

Um no. That’s 1980s management school thinking where every business – from airlines to software – can be reduced to selling soap.

Not having experience in running a passenger service with all the customer service issues that come when you’re dealing with the public is a concern. One hopes, prays even, that Mr Faurby and his employers have the wisdom to support the CEO with managers who do have a customer service ethos.

Then there’s the black hole of Australian public transport – ticketing.

While it’s impossible to quantify just how poor Australian governments have proved themselves to be with ticketing systems; Sydney’s convoluted, complex, siloed and passenger unfriendly public transport system adds another layer of complexity that the new management of Sydney Ferries is going to have to deal with.

There’s no doubt though that Sydney Ferries need reform; its management was incompetent and, beyond the usual cheerful deckhands, the staff were surly with little concept of customer service.

Done well, outsourcing Sydney Ferries could be for the better; but the emphasis on cost savings and what appears to be naive management expectations should make taxpayers’ hearts sink.

Distorted priorities

How government subsidies distort industries like film, aviation and motor manufacturing

Every year the bureaucrats of the world’s movie production industry make their way to the Locations Show where governments compete to attract movie producers to their states with fat subsidies.

This year, the preparations for the Locations Show conference are overshadowed by the US government’s struggling with continued subsidies to the Export Import Bank, an organisation going by the wonderfully Soviet name of the ExIm Bank.

While ExIm and screen subisidies aren’t directly linked in the US – the bank being a Federally funded body that finances American manufacturing sales to foreign market while state governments compete for productions – both though illustrate the zero sum game of corporate welfare that leaves citizens poorer in the process.

Delta Airline’s law suit over Exim subsidies to Boeing gives us a real life illustration of how business loses in these battles for government largess.

When Delta Airlines goes to buy or lease a Boeing 777, they have to find funds at a commercial rate of interest. Air India on the other hand gets a subsidised rate courtesy of ExIm bank.

However if Delta chooses to buy an Airbus A330, European governments will offer similar subsidies to the American carrier.

So the subsidy system actually encourages American carriers to buys European jets rather than the US products. Nice work.

This distortion is something we see too in film subsidies, as government funds are siphoned off to support large corporate movie productions.

Nowhere is this truer than in Louisiana where the state embarked in 2009 to capture the so-called “runaway production” market of footloose movie projects that shop around the world for the most lucrative subsidies.

This has worked, with Louisiana based movie production expected to total 1.4 billion dollars in 2011 on the back of $180 million in subsidies.

One of the productions Louisiana grabbed in 2010 was The Green Lantern which came as a surprise to the government of the Australian state of New South Wales who thought Sydney had secured the project.

The Green Lantern loss was the nadir for the Australian film industry that ten years earlier had been overwhelmed with productions like The Matrix Trilogy.

At the time of the Green Lantern loss the industry appeared to be in its death throes, crippled by a high Australian dollar and disadvantaged by relatively lower government subsidies.

You’d have thought that riches to rags story had taught Australian politicians that dumb subsidies don’t work and may have actually damaged the local film industry more than it helped.

Unfortunately not.

Last week the Australian Federal government announced $13 million in support for production of Wolverine. The Prime Minister’s office gushed;

To attract The Wolverine to Australia, the Gillard Government granted the producers a one-off payment of $12.8 million which will result in over $80 million of investment in Australia and create more than 2000 jobs.

The payment effectively provided The Wolverine a one-off investment package equivalent to an increase in the existing Location Offset to 30 per cent.

Without this effective tax offset incentive, the producers of The Wolverine would not have chosen Australia as the location.

In the 1950s, it made sense to invest in the industries of the future such as aviation, movie and car manufacturing industries.

Unfortunately for our politicians in Washington, Canberra, Sydney and Baton Rouge, we don’t live in the 1950s.

Taking care of our own

Our governments can’t fix every problem or address our every need. We need to take matters into our own hands.

“The council ought to do something” growled a friend who’d been stuck in a peak hour traffic jam.

That innocuous comment illustrates the fundamental challenge facing the developed world’s politicians – that we expect our governments to fix every problem we encounter.

In the case of the local traffic jam, the cars creating gridlock are parents driving their children to two nearby large private schools.

Despite the problem being caused by the choices of individuals – those decisions to send their kids to those schools and to drive them there – our modern mindset is “the government aught to do something” rather than suggesting people should be making other choices.

Socialising the costs of our private decisions is one of the core beliefs of the 1980s mindset.

Eventually though the money had to run out as we started to expect governments to solve every problem.

We’re seeing the effects of this in the United States where local governments are now having pull up black top roads, close schools and renege on retirement funds as those costs become too great.

As a society we have to accept there are limits to what governments can do for us.

Increasingly as the world economy deleverages, tax revenues fall and the truth that a benign government can’t fulfill our every need starts to dawn on the populace, we’ll realise that expecting politicians and public servants to save us is a vain hope as they simply don’t have the resources.

Bruce Springsteen puts this well in his song “We Take Care Of Our Own.”

The truth today is the cargo cult mentality of waiting for governments or cashed up foreigners to come and save us is over.

We’re going to have to rely more on our own businesses, families and communities to support us in times of need.

The existing institutions of the corporate welfare state are beginning to collapse under the weight of their own contradictions.

Joe Hockey knows this, but as a paid-up agent of the establishment he doesn’t dare nominate the massive cuts to middle class welfare and big business subsidies that are necessary to reform those institutions.

Waiting for the council to fix the local roundabout is nice but it doesn’t address the bigger problems.

It’s up to us to build the new institutions around our local communities and families. This is not a bad thing.

What if Bill Gates had been born in Australia?

Can a society that puts property speculation before innovation succeed in the 21st Century?

Microsoft founder Bill Gates is today one of the world’s biggest philanthropists having built his business from an obscure traffic management software company to what was at one stage the world’s biggest technology corporation.

But what if he’d been born in Sutherland, New South Wales rather than Seattle, Washington? How different would things have been for an Australian Bill Gates?

The first thing is he would have been encouraged to study law; just like his dad. In the 1970s lawyers had far more status and career prospects than software developers in Australia.

Causing more concern for his parents and career counselor would have been his determination to run his own business. It’s far safer to get a safe job, buy a house then start buying investment properties to fund your retirement.

The Funding Drought

If Bill still persisted with his ideas, he’d have hit a funding problem. No bank wouldn’t be interested in lending and his other alternatives would restricted.

In the Australia of the 1970s and 80s they’d be few alternatives for a business like Micro Soft. Even today, getting funding from angel groups and venture capital funds depend upon luck and connections rather than viable business ideas.

Bill Gates’ big break came when IBM knocked on his door to solve their problem of finding a personal computer operating system; the likelihood of any Australian company seeking help from a small operator – let alone one run by a a couple of twenty somethings – is so unlikely even today it’s difficult to comprehend that happening.

Eventually an antipodean Bill Gates would have probably admitted defeat, wound up his business and gone to work for dad’s law firm.

Invest in property, young man

Over time a smart, hard working young lawyer like Bill would have done well and today he’d be the partner of a big law firm with a dozen investment properties – although some of the coastal holiday properties wouldn’t be going well.

While some things have changed in the last thirty years – funding is a little easier to find in the current angel and venture capital mania – most Australians couldn’t think about following in Bill Gates’ path.

Part of the reason is conservatism but a much more important reason are our taxation and social security systems.

Favoring property speculators over entrepreneurs

Under our government policies an inventor, innovator or entrepreneur is penalised for taking risks. The ATO starts with the assumption all small or new businesses are tax dodges while ASIC is a thinly disguised small business tax agency and assets tests punish anyone with the temerity to consider building an business rather than buying investment properties.

At the same time a wage earner is allowed to offset losses made in property or shares against their income taxes, something that those building the businesses or inventing the tools of the future are expressly forbidden from doing.

Coupled with exemptions on taxing the capital gains on homes, Australian households – and society – is vastly over invested in property.

Making matters worse, the ramping up of property prices over the last thirty years has allowed generations of Australians to believe that property is risk free and doubles in value every decade.

That perception is reinforced by banks reluctant to lend to anyone who doesn’t have real estate equity to secure their loans.

So we have a society that favours property speculation over invention and innovation.

Every year in the run up to Federal budget time tax reform becomes an issue, the real effects of negative gearing and other subsidies for housing speculation – the distortion of our economy and societies investment attitudes – are never discussed.

In Australia there are thousands of smart young kids today who could be the Bill Gates’ of the 21st Century.

The question is do we want to encourage them to lead their generation or steer them towards a safe job and an investment property just like grandpa?

Should we be subsidising industries?

Can we pick winners in a globalised world?

The 2012 UK “austerity” budget has one bright side with big tax breaks of the games and television industries.

Meanwhile down under, the Australian government is about to announce more massive subsidies to the local motor industry.

While protecting jobs and trying to help struggling industries is admirable, we should ask if the cost to the taxpayer and economy is worthwhile.

Squeaky wheels

“The industry has lobbied for such changes for several years” says the BBC report on the UK budget and this is one of the problems with industry specific support; that it’s the ones who complain the loudest who get the assistance.

Often the companies and industries lobbying for subsidies spend too much management time and resources duchessing ministers, public servants and key media “opinion makers” than actually listening to their customers.

The fact they have staff dedicated to lobbying efforts in itself shows where their investment priorities lie. It isn’t in building better products or delivering what their customers want.

Missing voices

It’s often lamented that the high growth and small business communities don’t receive support, this is because they are running and building their businesses rather than shmoozing journalists, public servants and politicians.

Industry support programs often end up helping established insiders or those with a talent for filling in government grant applications rather than those who genuinely need help.

The Australian film industry is a good example of this where talented film makers struggle to attract funding from government agencies while a generation of well connected, experienced form fillers keep churning out subsidised movies that no-one wants to see.

Behind the times

One of the problems with government picking industry winners is they are often well behind the times with support going to mature or fading industries; both the Australian and UK announcements illustrate this.

The UK games announcement is at least ten years behind the times; strategic investment in the games and TV industry a decade or two ago may have been a wise move, today it’s just supporting another mature sector that is struggling to adjust.

At least though the UK’s policies are somewhere near the 21st Century, the massive Australian support for the failed motor industry shows Canberra’s politicians are mired in an era somewhere Henry and Edsel Ford.

It’s worth noting one of the first moves of the incoming Australian Labor government in 2007 was to axe the Commercial Ready program that was designed to help commercialise new technologies and innovations yet motor industry support dwarf any savings from abandoning this scheme.

The investment problem

In most countries the real problem to building jobs and industries is investment. Both the UK and Australia illustrate this with their domestic investment being largely directed at the housing industries.

The two countries have taxation and social security policies that favour over-investment in property. In Australia the problem is exacerbated by a retirement saving scheme that directs domestic savings to index hugging fund managers.

Australia’s sinking of money into an industry that have been struggling for nearly forty years and currently suffering massive worldwide oversupply is one of many damning indictments on the country’s political classes squandering of the current resources boom.

Making things worse, massive subsidies to uncompetitive industries already distorts a twisted economy.

Real economic reform that encourages investment in research, development, training, innovation and entrepreneurs is tough and means losses for many in those vocal, dying industries.

For the average politician a feel good announcement giving a bucket of money to a noisy group is a much better short term investment.

The challenge, and opportunity, in the democratic world is to make the politicians aware that the economy has moved on from the times of John Major in Britain or Bob Menzies in Australia.

It may well be that industries do need, and deserve, government support although we need far more scrutiny and justification from our political leader of why certain groups get help while others do without.

Building a digital economy

How does a state build new industries?

Yesterday the NSW Government hosted the Sydney leg of their Digital Economy Industry Action Plan forum meetings.

The aim of the action plan, one of a series for targeted industries, is to develop “a vision and strategy for the Digital Economy over the next decade in NSW.”

So how do we build a “digital economy industry” in a country that seems to be hell bent on staking everything on China’s continuing demand for coal and iron ore?

Picking winners

One of the things implicit in forums and plans like this is that the government has identified the ‘digital economy’ as a priority for economic development.

To help identify the opportunities the New South Wales plan breaks the sector into various industries;

  • Digital content and applications
  • Information services and analytics
  • Smart networks and intelligent technologies
  • Autonomous systems
  • E-research
  • ICT service innovation
  • ICT biomedical innovation
  • ICT safety and security innovation
  • Locally developed technologies and applications

The underlying assumption is the state has some sort of natural advantage in these areas or the potential to develop into a leader.

If these are the foundations of a region’s digital industries then we have to understand how they were identified as it’s difficult to build an industry if we don’t know what we can do.

The role of government

An important question is the role of government, an unfortunate thing with bureaucrats and politicians is they sometimes over estimate the influence they have on industry and the economy in general.

In NSW the state government’s role is going to be at best marginal, they can establish policies and offer financial incentives but business needs access to essential skills, finance and infrastructure.

Walking the talk

It’s all very well for governments to proclaim they support local businesses but if they prefer to buy from multinationals – even if the big boys are more expensive and have a less than stellar delivery record – then the domestic industry cannot thrive.

To be fair to governments, this reluctance to buy from local suppliers is shared by Australian corporations and on its own is probably one of the biggest obstacles for innovative companies and entrepreneurs to thrive in Australia.

Until this attitude changes among governments and corporations, it’s  difficult to see how local businesses can develop and survive.

Open data

For the digital industries, open data is probably the most important aspects. Unfortunately the current generation of Australian public servants, managers and politicians share an almost Stalinist view about access to taxpayer owned information.

Without making public data accessible so entrepreneurs can develop new applications and existing industries can improve productivity, governments are only giving lip service to building a digital economy.

A good example of this is the expressed desire of successive state and Federal governments to build Sydney as a global financial centre.

To do this, free and open investment information is essential yet company and stock exchange data that is assumed to be public information in the United States and much of Europe or Asia is propitiatory and locked away behind paywalls.

Government and corporate obsessions with controlling information makes it unlikely any Australian state or city can be global centre in the digital economy or the banking sector which the NSW government sees as an other priority sector.

Consistent standards

Another area governments can improve is by having open standards across government agencies so, for instance, land information can be properly matched with health data or public transport details.

Right now policies on data and things like social media or content platforms is fragmented making the cost of government and doing business more expensive and convoluted than it should be.

Promote advantages

One of the weaknesses in Australia’s overseas marketing is the nation is portrayed as a bunch of alcohol swilling beach bums cuddling koalas.

Google Maps founder Lars Rasmussen once said Google’s head office reaction when he suggested establishing a development office in Sydney was “what are you doing to do? Sit on Bondi Beach and drink Fosters?”

A missed opportunity in Australia’s disjointed tourism and investment campaigns is ignoring the nation’s diverse ethnic and skills base. We need more emphasis on the multilingual skills of the state’s workers and less on bikini babes.

Capital Problems

Whenever a group like the forums gather, there’s always complaints about Australian business’ access to capital.

Australia’s taxation, finance and social security system favours speculation on the share and property markets rather than long term investments or taking risks on new business ideas.

Three generations of these policies have a created a population who, understandably, see owning property as the safest way to provide for retirement. The banking system has responded to this and is reluctant to lend for anything not secured by real estate assets.

At the same time we’ve allowed the compulsory superannuation system to be dominated by flaccid ticket clippers who are content to charge working Australians outrageous fees for hugging the stock indexes.

Sadly what should have been a source of capital for innovative businesses largely spends its time lobbying governments for more protection and a bigger cut of workers’ incomes.

The access to capital is a serious problem for Australian business and one that can’t be kicked up the road for ever by Liberal or Labor Federal governments but it isn’t something the states can fix.

Not only do the distorted investment priorities of Australian society damage developing industries, it almost certainly guarantees the dream of making Sydney a global financial centre unattainable.

Education

One of the canards that always pops up at industry development forums is that educators aren’t in touch with employers’ needs.

There’s a certain type of business manager or owner who believes the roles of schools, technical colleges and universities is a sausage machine popping out perfectly formed young workers who can pick up a spanner, hair clippers or a copy of Photoshop and start productive work straight after being shown where the tea room is.

Those business owners are deluded.

None of that’s to say educators shouldn’t be adapting to their times as well as being open and transparent but the idea that the role of schools is to equip kids with the skills we need today would see them unprepared for next decade’s economy.

Equally however, Australia’s universities and training colleges have been encouraged to offer third rate courses to overseas students attracted by the prospect of getting permanent residence in the country. That bums on seats model had hurt the quality of the nation’s education sector and the skill levels of graduates.

Attitudes

The most essential part of building any nation’s industry is the attitude of people – if the prevailing view is it’s too hard, or threatens established interests then it won’t happen.

Probably the best advantage New South Wales, and all of Australia have, is a comparatively young, diverse and outward looking population.

The best thing the government can do in trying to build new sectors, be they in the digital economy or anywhere else, is to fix what they can such as procurement, open data or taxation and get out of the way.

A constant dreams of governments is to build the next Silicon Valley, just as it once was to build the next Detroit or Birmingham.

The era of the big engineering works passed, at least in the Western world, and the age of venture capital driven social media platforms will probably be over soon as well.

Aping someone else’s success – while ignoring the historical factors and accidents that created it  – seems a guaranteed way to disappointment.

The best part to build a digital economy, or any thriving society, is to encourage the risk takers and the inventors. Bring them together, let them loose and you build the next economic powerhouse.

Does small business need government support?

Can governments provide business assistance?

The New South Wales State Government’s decision to axe their long standing small business programs raises the question of whether small businesses need government support at all.

Last week’s announcement the NSW Government are abandoning their business education programs and replacing them with a previously announced network of local business advisors shows where small business lies in the state’s list of priorities.

Taken at face value, the changes appear to be moving back to the face-to-face business advice model of a decade or so ago that was common before the winding back of small business programs and local enterprise centres by then Federal Liberal and state Labor governments under John Howard and Bob Carr.

On closer examination, it’s a cut to business support and an effective withdrawal of NSW government assistance to small business. The remaining services will be outsourced to the same local business centres that have been starved of funds for over a decade.

A concern with the individual advisors will be how many businesses they can reach, according to the NSW Trade & Investment annual report 2010-11 the axed events had an audience numbering over 5,000. It’s difficult to see how the advisor network will match that and makes one wonder how the more important events couldn’t have been streamed or podcast across the Internet.

Putting aside the pros and cons of this restructure, the bigger question is should small business expect any government support at all?

The record of Australian government support for industry is not good. We only have to look at repeated visits to the trough by what remains of the Australian car making industry, the bipartisan debacle of assistance to the renewal energy sector or the support given by the Keating Labor government to Kodak to see how well schemes have worked out.

Most of Australia’s economic success stories have happened despite, not because of, government’s pouring money into industries. For example, the first five years of the current mining boom was completely missed by the political classes along with the Canberra press gallery and the media economic commentators.

This is where small business steps in – rather than relying on access to the ministerial suite to protect their industries, the little guys and the startups compete on price, service and innovation. Aspects that organisations in protected industries or those dependent on taxpayer largess struggle with.

Indeed many small business owners and entrepreneurs struck out on their own because they felt stifled by bureaucracy. So offering them programs wrapped up in paperwork is counter intuitive.

Where the government can help is with keeping busy business owners up to date with new developments in business, markets and technology which was exactly what the events programs like Small Business September and Micro Business Week did.

It’s difficult to see how the individual business advisors employed by local Business Enterprise Centres will keep up with their clients up with changes regardless of how skilled or well intentioned they are.

All of the changes are justified by the report from the Small Business Commissioner’s listening tour. Apparently she was told businesses didn’t want events like Small Business Septtember

I certainly didn’t hear any complaints at the breakfast fourm I attended at the Northern Beaches, most of the concerns seemed to be from cafe owners arguing about council outdoor seating permits. If the commish wants to get involved with that nest of vipers, I wish her the best of luck.

Overall, small business can’t expect much from government; particularly in the modern corporatist society where Big Government does Big Deal with Big Unions and Big Business while Big Media selectively reports what suits it.

Probably the best thing for small business is stay nimble and avoid being stepped on the Big Dinosaurs as they dance obliviously to the major changes that are happening in the world around us.

Big dinosaurs look after their own, don’t expect them to give you anything except a big shower of dung.

Disclaimer: I’ve been hired by Trade & Investment to host various events on the now axed programs and worked for 19 months at what was then the Department of State and Regional Development. I wish all of those former colleagues who now find their positions abolished the best of luck in finding another role.

Irrelevance and the media

Real problems are ignored as the big boys play games

It’s a shame we weren’t around when dinosaurs became extinct. Then again, maybe we are.

News Limited business commentator Terry McCrann writes about the “Bleakest of views from the shopfronts” in his Sunday column describing the problems of retail.

All of the problems Terry cited are from big retailers – Woolworths, Dick Smith, Harvey Norman and JB HiFi. To make it clear he was talking about corporate issues there’s even a reference to General Motors.

Nowhere does Terry talk about smaller businesses or those challenging the big guys, folk like Ruslan Kogan or the Catch of the Day team. It’s all about the big end of town.

Terry’s article illustrates the problem of relying on incumbent mainstream media commentary; that it is Big Media talking about Big Business and Big Government.

“Small”, “ordinary” or “average” has no place in their conversation, if you can call the pronouncement of mainstream media commentators a conversation at all.

We can understand this – for a journalist, it’s good for the ego and career to look like a “heavy hitter” in big business. For the politician, small business and community groups can’t pay the speaking and consulting fees paid by corporations to supplement their meagre retirement benefits.

Increasingly what happens in the corporate board rooms or the once smoke filled rooms of political caucuses is out of touch with the real world.

This has become particularly acute since the responses to the 2008 crash proved to the management classes that their bonuses and perks will be protected by government bailouts regardless of how many billions of shareholder wealth they manage to destroy.

In the United States we see this in political controversies being focused on contraception – an issue settled forty years ago – while the country faces fundamental challenges to its economic base and the basic welfare of its citizens and industries.

While in Australia the media ‘insiders’ rabbit on about pointless internal party politics and soothing articles on how everything else is fine, we just need to be more optimistic. Yet the real questions about how we take advantage of the country’s greatest export boom, position the economy for the next 50 years and the nation’s dependence on the Chinese economy are being ignored.

Terry McCrann’s story is emblematic of just how out of touch Big Media, and their friends in Big Business and Big Government, are with the real world.

All we can do is let them get on with it and not take them too seriously.