Tag Archives: Australia

Setting aside the burdens of the past

The first report from the Australian Centre for the Edge on the Australian Shift Index, Setting aside the burdens of the past: The possibilities of technology-driven change in Australia, has just been published. (Press release here.)

We’ve worked hard on this over the last six months or so and I’m very happy with this report as an introduction to what we’ve done. If you’re interested in how technology is driving change both in business and in society in general, then I highly recommend that you head over and grab yourself a copy. (And if we’re in something like the same neighbourhood I’d love to catch up for a coffee to discuss. Or feel free to leave a comment below.)

The Shift Index was created as a tool to help us understand if the rapid pace and increasing uncertainty we feel in the business and social spheres is real, or if it is just an illusion created by the always-on environment we live. (This is a bit like how nationalised news brings us stories of shootings in other regions leading us to think that crime has increased, when in actual fact crime has been decreasing.)

As we say in the report:

The world is changing faster than ever. However, we can only respond to and manage a change if we can measure and understand it. If we want to respond as a community, then we need to find a way to quantify the change. We need to ask ourselves whether the perceived change is real, and if it is, how we can capitalise on it.

The short answer is that the world is definitely changing and that Australia, Australians and Australian businesses are successfully adapting to the changes. We can’t, however, rest on our laurels as the drivers of change are still present and it doesn’t look like they will dissipate for some time.

The concept behind the Shift Index is that developments in digital infrastructure (computing, storage and networks) is driving increases in information flows, and that these information flows are reconfiguring society by tipping the balance of power from the merchant to the consumer.

The framework we used as our starting point was developed by the US Center for the Edge, founded by John Hagel and John Seely Brown. The US Shift Index was developed in 2009 and has been updated each year since then.

Our goal with the Australian Shift Index was to take the US framework and build a comparable index for Australia, allowing us to take the lessons learned from the US index and translate them to our local context. At the same time, we tailored the index – tweaking or changing some of the metrics used – to create a version that is uniquely Australian and which can provide us with insight into the particular challenges we face here.

The methodology defines three groups of metrics:

  • The Foundation Index measures the price-performance of computing, storage and network technologies, the penetration of these technologies into society, and change in regulation to support the adoption of these technologies. This is the lead indicator in the Shift Index.
  • The Flow Index measures the resulting increase in information flows in terms of virtual flows (mobile phone and internet usage), physical follows (attendance at conferences, business travel, and money transfers) and flow amplifiers (social media and the like).
  • The Impact Index measures the impact of these changes across the Australian market (competitive intensity, labour productivity and stock price volatility), firms (asset profitability and the like) and people (consumer power, brand disloyally, returns to talent, and increased in executive turnover). This is the lag indicator for the Shift Index.

The result is three high-level metrics that quantify the the drivers for the change, the change itself, and it’s impact.

AU2012shiftindex

Image source: Centre for the Edge

There’s ten major findings in the report:

  • Fast adopters: Australians have a good track record for adopting new technology. Our challenge is to continue adapting, and to find opportunities to leverage these technologies within our institutions.
  • Tech-driven change: The permeation of cheap, powerful computing, communications and storage technologies is driving change and will continue to do so into the foreseeable future.
  • Knowledge flows: New technology has resulted in new flows of information at unprecedented volumes.
  • Higher competition: The Australian market has become more competitive as a result of new technology and knowledge flows.
  • Capital over labour: Australia’s focus has shifted away from labour and towards investment in new technologies for more efficient workflows.
  • Knowledge economy: Australia has shifted from an industrial and agricultural economy to a creative, service-based economy.
  • Unrealised potential: There is a big gap between our technological capabilities and the way we currently use technology to solve problems.
  • Economic strength: Australia’s economy is strong and demonstrates better asset profitability than the US.
  • Recession-proof: The global downturn in 2008 was only a pause in our progress and has not halted Australia’s transformation.
  • Future success: Our continued prosperity depends on how well our knowledge workers can find new ways of using technology to solve problems.

These ten findings are only the tip of the iceberg though. While the report answers some interesting questions, or raises even more questions, questions that we intend to delve into further.

Image source: macinate.

It’s time to make the hard decision

Toyota, as you’ve probably heard, is shutting down operations in Australia. This has triggered the expected wave of commentary claiming that this is the end of manufacturing in Australia and that unless the government does something about this industrial relations problem then the entire car manufacturing supply chain (i.e. everything from final assembly back) will collapse with disastrous consequences for the Australian economy.

This point of view is both disingenuous and unhelpful as it ignores the fact that the viability of car manufacturing in Australia is strongly influenced by both economic trends outside our borders and by systemic challenges within the car industry itself. Australia might be an island, but that does not mean that events outside our borders will not affect us. Industrial relations might be part of the challenge, but it’s not the whole story.

Pouring more money into the domestic car manufacturing supply chain may provide short term relief, but it does not address the root cause of the problem.

We need to make the hard decision.

If car manufacturing is to be part of our industrial mix in the longer term then we need to transform the domestic industry, creating a new operating model that enables a stable manufacturing industry in Australia within the global context.

If we cannot create a sustainable car manufacturing industry in Australia, then we should immediately start to transition the resources (people and assets) to new industries that do have a future here.

Simply propping up an industry who time has come will only ever be a short term solution, and one which is a disservice to the generation just entering the workforce.

Capital has won over labour

The global car industry is in trouble. There’s too many factories and not enough people buying cars.

Similar situations are not uncommon in other capital intensive industries. Decades spent automating and streamlining processes has transferred costs from labour to capital. This has been great for customers as it lowers the unit cost of the goods manufactured. The manufacturers, on the other hand, find that their business, or even their entire industry, can all too easily be pushed into a never ending cycle of boom-and-bust. We only need to look to containerisation and the development of the global container network to see these forces in action.

Containerisation transformed the old, manual, approach to shipping into a highly automated and efficient global logistics network. Goods were packed into large metal containers and craned onto and off ships, rather than relying on stevedores to manhandle individual barrels. This resulted in a dramatic reduction in shipping costs and time (somewhere between 60% and 80%), since the majority of the work was in the manual loading and unloading.

However, building a container network required a huge investment. New ships were commissioned, larger ships with complex racks to hold the containers. Fleets of containers were required to carry the goods. Docks also need to be changed from the fingers sticking out of a bank that was suitable for manual loading, to the large container terminals that host huge cranes.

These investments allow shipping companies to slash the cost of shipping. It also made these businesses very inflexible. Previously shipping companies could trim costs when demand dropped off, parking ships and laying off their crews. Now, with huge investments in container infrastructure, the shipping companies were forced to keep the boats moving during the down turn, as the revenue was needed to service loans or pay dividends to investors.

Times were good when demand was high, with the low shipping rates helping to drive volume up. When times were bad when demand was low, as the boats needed to keep moving even if it meant that they were losing money.

Car Manufacturing in Australia

Australia finds itself wanting to protect its traditional car manufacturing industry when the dynamics of the global car industry and economy conspire against us.

Car manufacturers need to improve factory utilisation if they are to remain profitable. Shutting factories down for a few weeks is not enough, nor is trimming labour rates, as the majority of their costs are in the plant and equipment contained within these factories, and not in the labour required to operate and management.

With too many (expensive) factories and not enough people buying cars, car companies are looking to consolidate their operations. Ideally the final resting place for these factories will be adjacent to major markets in a comparatively low cost geography. (Despite the balance of costs being in equipment, moving from a high to a low cost geography can still shave 10% off the total cost of manufacturing.)

Similarly, reducing the time from final assembly to delivery to the customer by placing the factory as close as practical to the customer, helps to reduce costs by reducing the time it takes for product to flow through the supply chain. This cuts the amount of working capital required as well as cutting the time required to push product updates through the supply chain.

Ideally, given current manufacturing technology, one of these manufacturing centres will be right in the middle of South-East Asia, enabling quick and convenient access to the the fastest growing car markets in the world. Thailand looks good. Another would be somewhere in the centre of the Americas, allowing it to service both North and South America. Perhaps Mexico or the southern states of the US? Eastern Europe might get a look in for a third manufacturing hub, but then it might just be easier to service Europe out of S.E. Asia or the Americas. (Note that niche plays such as BMW are the exception to this rule, as they are not selling into the mass market.)

So what does this mean for car manufacturing in Australia? Australia fairs rather badly on both the dimensions we just considered.

As a high cost country we can expect cars manufactured domestically to cost roughly 10% more than those manufactured in a low-cost hub. Unfortunately wage bargaining will be little help unless we’re willing to slash wages to the same levels as Mexico and Thailand, which is something that the Australian public is unlikely to find palatable.

Our position below S.E. Asia and a long way from the US and Europe also puts us at a disadvantage. While shipping a car from Australia to S.E. Asia, the Americas or Europe will not significantly affect the final price, the delay pushes up working capital requirements while the longer supply chain is more challenging to manage.

We can’t expect our domestic car industry to export its way out of this problem. Nor is the domestic market large enough to sustain it when cheaper imports are flowing in from overseas manufacturing hubs. The car industry is, after all, a global industry.

Pouring money into the industry might support it in the short term, but at what cost? If it cannot complete globally then it will eventually succumb to the pressure. And given the perilous state of the global and domestic car industries, that time will probably be sooner than later.

In the mean time we’re encouraging a generation of eager and talented young adults to build their lives around a career and an industry that we know will no be able to support them. They deserve better.

Can technology save us?

One solution to our dilemma is to find a model for the industry that can work for Australia.

Consider, for a moment, the replicator from Star Trek. Or, if you’re less inclined to science fiction, the recent explosion of 3D printing and the maker movement.

If we can slash the investment required to manufacture cars by slashing the investment required to build a factory, then the decision on where to locate that factory might tip in our favour. If a rather large 3D printer costing AU$10,000 could print a car, then every dealer would have one. Why ship a finished car from one of the manufacturing hubs when you can pick the model and options you want, have it printed, and pick it up in a day or two.

3D printing might be some way off, but there are people out there looking at this problem. iStream, for example, is the result of looking at the manufacturing process to see if there is a better, faster and cheaper way to manufacture cars. The result is a manufacturing plant that is 20% the size of a conventional factory, and which reduces the typical capital investment by up to 80%.

If we can use technology such as iStream, or one of its descendants, to reduce the factory footprint then we might be able to arrive a solution that can be sustained by our domestic market.

Taking this path would require an investment at the national level. The major car manufacturers are struggling with their older, more capital intensive, operating model and have no interest in a new approach. If we are to take this route then we cannot rely on the existing brands.

Should we cut out losses?

If technology cannot save us, if the consensus is that it is not possible to build a sustainable, mass market, car industry in Australia, then we need to consider our options.

Should we copy a page from Germany’s playbook, and invest in building a high-value, niche industry? An Australian equivalent to BMW or Mercedes?

Or are there other manufacturing industries that can absorb the work force? Should we, for example, invest in becoming the leading manufacture of pre-build housing? (We already have some form in this area.) What industries can we excel in? As others have pointed out, ending car production is not the end of the world.

It’s time to make the hard decision

Pointing out the key role the car industry has historically played in our economy, and focusing on how we might keep the industry alive, is ignoring that fact that the domestic troubles are part of a larger global trend, a trend that we can do little about.

Regardless of the path we each, as individuals, prefer, the debate we need to having is on how will we choose between the the options available too us.

Manufacturing is not returning to the West

There’s many claims over the last year or so that “manufacturing is returning to the West” and “China’s days as the world’s factory are numbered”{{1}}. These claims are misguided.

[[1]]Vivek Wadhwa (23 July 2012), The End of Chinese Manufacturing and Rebirth of U.S. Industry, Forbes[[1]]

We’ve just reached a time where manual and skilled labour is no longer a major manufacturing cost, causing final assembly to slowly drifting toward the customer base it serves. This shift reduces the length of the supply chain from assembly to your front door resulting in a reduction in turn-around time which, in turn, reduces working capital requirements and allows manufacturers to push product updates through the supply chain faster.

Manufacturing isn’t leaving China and other low cost manufacturing centres. What has changed is that it now makes good sense to manufacture some high value but low volume and bulky products in other major markets, such as the U.S.

The problem with thinking that manufacturing is returning to the first world is the implicit assumption that this also means that the old manufacturing jobs will return. They won’t. They no longer exist. It also ignores that fact that the huge scale of manufacturing in China will help it to grab the lions share of the world manufacturing market for some time to come.

Manufacturing as a manual process

Consider Henry Ford’s assembly line from 1913: a complex, labour intensive process that created a large number of good, blue collar jobs.

566px-Ford_assembly_line_-_1913Source: Public Domain

When we think of manufacturing this is the image we usually have in head. It’s a bit like those train crossing signs that have a caricature of a steam engine on them. It might not be the current reality, but it’s the image we use to understand what’s going on around us.

As transport costs dropped, work moved to lower cost countries

Back in Henry Ford’s day transportation was expensive. Factories were often located close to the markets they served to minimise transport costs, with management struggling to ensure that enough raw materials arrived at the factory to keep it busy. However, the development of railroads, steam ships, and the shipping container network incrementally cut the cost of transport until it cost roughly the same to move a box across the world as it did to move it across the country.

As Marc Levinson points out in his book, The Box{{2}}:

[[2]]Marc Levinson, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. iBooks.[[2]]

As transportation costs decline relative to other costs, manufacturers can relocate first domestically, and then internationally, to reduce other costs, which come to loom larger. Globalization, the diffusion of economic activity without regard for national boundaries, is the logical end point of this process. As transport costs fall to extremely low levels, producers move from high-wage to low-wage countries, eventually causing wage levels in all countries to converge. These geographic shifts can occur quickly and suddenly, leaving long-standing industrial infrastructure underutilized or abandoned as economic activity moves on.

This is the shift we’re thinking of when we consider off-shore manufacturing: China as the source of cheap (and fairly unskilled labour).

Today, manufacturing is not a manual process

Apple released an interesting video the other day{{3}}. It shows the manufacturing process for the new Mac Pro.

[[3]]Greg Koenig (22 October 2013), How Apple makes the Mac ProAtomic Delights[[3]]

SourceApple

What’s interesting about this process is how few people are involved.

Manufacturing has changed a lot in the last few decades. What was once dominated by manual labour is now an automated and highly efficient process. Machines have replaced people. We can see this in many of the factories that are returning to the West: they’re all highly efficient, highly automated, capital intensive operations that require very little manual or skilled labour.

7395855880_053e6daede_cSource: Steve Jurvetson

Machines, however, have yet to replace engineers

While capital has won over manual and skilled labour, that same is not true for engineers: knowledge workers.

As Roger Martin found in his research for a recent HBR article{{4}}:

[[4]]Roger L. Martin (October 2013), Rethinking the Decision Factory, Harvard Business Review[[4]]

I vividly remember working with the CEO of one of North America’s largest bread manufacturers in 1990–1991. He had just replaced a labor-intensive and antiquated plant with the most advanced bread bakery on the continent. He proudly told me that the new computerized ovens and packaging machinery had reduced direct labor costs by 60%. But meanwhile, a throng of new and expensive knowledge workers had been added at both the head office and the plant—engineers, computer technicians, and managers—to take care of the sophisticated computer systems and state-of-the-art equipment. The new plant wasn’t quite the unalloyed good that it appeared at first sight. Variable costs of manual labor fell, but the fixed cost of knowledge workers rose, making it critical to keep capacity utilization high—which was possible in some years but not in others.

While the West has been worried about losing it manufacturing capability, many of the off-shore manufacturing destinations have been investing in education. China, for example, now has a huge engineering workforce that companies can draw own to sort out their manufacturing problems.

It’s this incredible ability to mobilise huge workforces that is keeping many manufactures in China. An article in the New York Times from last year has an Apple anecdote that shows this in action{{5}}.

[[5]]Charles Dugigg & Keith Bradsher (21January2012), How the U.S. Lost Out on iPhone Work, The New York Times[[5]]

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

Moving closer to the customer

The rapid pace of change in today’s market is driving companies to reduce the time between final assembly and when the product drops into the customer’s waiting hands.

Zara is the poster child for this shift, with a supply chain can create a new product and then have it in the stores in around two weeks. Zara has used this ability to disrupt the traditional annual, seasonal fashion cycle, resulting Zara becoming one of the largest retailers in the world.

Apple’s recent decision to make the Mac Pro in the U.S. is part of a trend to move the manufacturing of high value but low volume and bulky products closer to the customer. Elon Musk’s Tesla is also part of this trend.

Manufacturing automation technology has reached the point that it makes more sense to locate the manufacturing of these products closer to the customer, allowing transport costs and delivery times to be minimised.

We shouldn’t assume, however, that this trend will end with manufacturing returning to the West.

It’s easy to forget the more people live in Asia than in the entire rest of the world combined. If manufacturing is moving to be closer to the customer, then we need to remember that there are more customers in Asia than in the rest of the world. China’s position as a manufacturing powerhouse appears safe for the time being.

CK6aONG

Source: valeriepieris

What we mean by “export” is changing

So just where will this trend take us? (And, by extension, will our old export industries return, bringing their jobs back with them?)

The future of manufacturing and export seems – like to many industries – connected to the knowledge economy.

Those old manufacturing jobs are never coming back. They no longer exist. Similarly, thinking in terms of operating a factory and then exporting to another country is also looking somewhat antiquated.

Today (or perhaps, tomorrow) a manufacturer is a simply company that is run from one country and, from there, manages the sale of products in another.

Kogan{{6}} is a great example of this. The business is run from South Melbourne, Australia, which is where the products are designed. The products themselves are made in China and (in many cases) shipped directly to the United Kingdom where they are sold via the company’s UK web site (which is also managed from Port Melbourne, but hosted somewhere “in the cloud”).

[[6]]Kogan @ PEG[[6]]

An even more interesting example is another local business which sells safety barriers that are placed around robots in factories to ensure that workers aren’t accidentally injured. They recently started exporting to Europe. They did this by setting up a small, automated factory in Germany to service the European market. The barriers are designed in Australia and the designs are beamed directly to the machines in Germany, machines that consume resources from all over the globe.

So manufacturing – as we’ve traditionally understood it – is not returning to the West. The blue collar jobs that went overseas are not coming home to give our rather lacklustre economies a boost.

We can also expect China to remain an manufacturing powerhouse for the foreseeable future. The huge scale of operations over there, and the ability to rapidly redeploy these resources, will allow China to grab more than it’s fair share of the world manufacturing market.

Manufacturing, like so many industries{{7}}, is changing, and changing rapidly. What’s most interesting though, is how a new generation of companies are emerging that are finding ways to exploit this situation to “export”, and create new, knowledge intensive jobs at home in the process.

[[7]]The destruction of traditional retail @ PEG[[7]]

Source: Steve Jurvetson

Innovation [2010-04-26]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

Innovation [2010-02-17]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

  • An innovation report card [The Conference Board of Canada]
    Countries with the highest overall scores not only spend more on science and technology but also have policies that drive innovation supply and demand.
  • Innovation: what’s your score? [McKinsey & Company: What Matters]
    Can companies measure the impact of their innovation activities? Can they benchmark their performance on innovation against that of their peers? Can the long-term effects of innovation strategies be tracked systematically? Yes, yes, and yes. In fact, not only can companies objectively assess innovation; we believe they must. Only then will they know how to select the right strategies and execute them well.
  • The Original Futurama: The Legacy of the 1939 World’s Fair [Popular Mechanics]
    Seventy years after the closing of the 1939 New York World’s Fair, The Daily Show writer Elliott Kalan looks back at its past vision of the World of Tomorrow.
  • Why private companies are more innovative [BusinessWeek: NEXT]
    Do privately held companies have an edge when it comes to long-term innovation? At least some of them seem to. Recently, Al Gore—former Vice-President and Senator and now Nobel Prize-winning environmental evangelist—declared S.C. Johnson & Son one of the most sustainable companies in the world.

What is the role of government in a Web 2.0 world?

What will be the role of government in a post Web 2.0 world? I doubt it’s what a lot of us predict, given society’s poor track record in predicting it’s own future.

One thing I am reasonably sure of though, is that this future won’t represent the open source nirvana that some pundits hope for. When I’ve ruminated in the past about the changing role of government, I’ve pointed out that attempting to create the future by dictate is definitely not the right approach. As I said then:

You don’t create peace by starting a war, and nor do you create open and collaborative government through top down directives. We can do better.

There was an excellent article by Nat Torkington, Rethinking open data, posted over at O’Reilly radar which shows this in action. As it points out, the U.S. Open Government Directive has prompted datasets of questionable value to be added to data.gov; while many of the applications are developed as they are easy to build, rather than providing any tangible benefit. Many of the large infrastructure projects commissioned in the name of open data suffered the same fate as large, unjustified infrastructure projects in private enterprise (i.e. they’re hard for the layman to understand, they have scant impact on solving the problems society seems plagued with, and they’re overly complex to deliver and use due to technological and political puritism).

A more productive approach is focus on solving problems that we, the populace, actually care about. In Australia this might involve responding to the bush fire season. California has a similar problem. The recent disaster in Haiti was another significant call to action. It was great to see the success that was Web 2.0 in Haiti (New Scientist had an excellent article).

As Nat Torkington says:

the best way to convince them to open data is to show an open data project that’s useful to real people.

Which makes me think: government is a tool for us to work together, not the enemy to subdue. Why don’t we move government on from service provider of last resort, which is the role it seems to play today.

Haiti showed us that some degree of centralisation is required to make these efforts work efficiently. A logical role for government going forward would be something like a market maker: connecting people who need services with the organisations providing them, and working to ensure that the market remains liquid. Government becomes the trusted party that ensures that there are enough service providers to meet demand, possibly even bundling service to provide solutions to life’s more complex problems.

We’ve had the public debate on whether or not government should own assets (bridges, power utilities etc.), and the answer was generally not. Government provision of services is well down a similar road. This frees up dedicated and hard working public servants (case workers, forestry staff, policy wonks …) to focus on the harder problem of determining what services should be provided.

Which brings me back to my original point. Why are we trying to drive government, and society in general, toward a particular imagined future of our choosing (one involving Open Government Directives, and complicated and expensive RDF infrastructure projects). We can use events like the bush fires and Haiti to form a new working relationship. Let’s pick hard but tractable problems and work together to find solutions. As Nat (again) points out, there’s a lot of data in government that public servants are eager to share, if we just give them a reason. And if our efforts deliver tangible benefits, then everyone will want to come along for the ride.

Updated: The reports are in: data.gov has quality issues. I’ve updated the text updated with the following references.

Updated: More news on data.gov’s limitations highlighting the problems with a “push” model to open government.

Innovation [2010-02-01]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

Innovation [2010-01-04]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

  • Cisco’s Patent Strategy: It’s More Than Numbers [BusinessWeek: NEXT]
    Innovation—at least as measured by patents—seems to fading in the U.S. For the first time, moreover, foreigners obtained more patents than U.S. residents.
  • Technology First, Needs Last [jnd]
    Don Norman has come to an interesting conclusion: design research is great when it comes to improving existing product categories but essentially useless when it comes to new, innovative breakthroughs.
  • Boyer Lectures [Radio National]
    General Peter Cosgrove, AC MC (ret’d) presented the Boyer Lectures, from 8 November 2009, with his 40 years of military experience and service to Australia placing him in a unique position to talk about the challenges and opportunities faced by society today and into the future.
  • Head to Head: Innovation in China and the US [Innovate on Purpose]
    A survey comparing the attitudes and expectations about the US and China in regard to innovation finds some relatively unexpected differences, and some safe assumptions.

Innovation [2009-11-16]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

  • Warren Buffett’s bet against innovation [BusinessWeek: Innovate]
    In proclaiming an “all-in wager on the economic future of the United States, Warren Buffett just paid $44 billion for a 19th century technology platform, a railroad, that carries 20th century goods—coal, agriculture, imports from Asia, petroleum. This is a vision of an America mired in the past and in economic and political decline. And Buffett just might be right. He has a great track record betting against innovation.
  • Embracing Innovation: a new methodology for feature film production in Australia [Centre for Screen Business]
    Do too many Australian films fall into a budgetary ‘no-man’s land’ – not big enough to compete with the US studios, yet too big to stand a chance of commercial viability in a market flooded with independent films? Robert Connolly’s recommendations provide us with valuable grist for the mill as we, in the IT industry, work our way through the current evolutionary phase our industry is going through, driven by the shift from large, on premises applications to a future increasingly dominated by cloud solutions. His approach to the problem is also an excellent model of how to engage with the wholesale transformation of an industry.
  • 10 examples of minimum viable products [Venture Hacks]
    Brilliant products are rarely the result of brilliant ideas. Most products start small, as minimum viable products, and then grow as the customers and developers work together to learn what the product should be.
  • What do the crowds know about innovation? [Innovate on Purpose]
    Companies use different strategies and techniques for crowdsourcing ideas. All of these approaches help gather ideas from the crowd, but they also serve as trend spotting and public relations opportunities as well, and some companies might be more interested in these secondary effects. As Henry Ford pointed out, “If I had asked my customers what they wanted, they would have said a faster horse.”

The NBN wants to be free

There’s been a lot of discussion on what Austalia’s national broadband network (NBN) will cost when it’s finally delivered to consumers. How much will we need to stump up to take part in today’s knowledge economy? Most cost recovery models have ISPs charging monthly fees of over $200, which is a lot more than the $50 per month most of us are used to paying. Who’s gonna pay that? A lot of folk have been pointing out the folly of forcing through a broadband network that few of us can afford, let alone be bothered to pay for.

Is this missing the point though? What if the government’s intention is to make the NBN free (or close enough to as to make no difference)? Much like most other public infrastructure such as roads. There’s precedents for this, from the New Deal though the recent government report on supporting innovation and the fact that the government is sitting on a large pile of money that they intend to spend.

The global financial crunch has had a dramatic impact on everyone’s lives, though Australia has been in the lucky position of avoiding the worst of the down turn. Australia is even the first large, rich country to raise interest rates on the back of the world recovery. Discussion has now turned to the nature of this recovery: will it be V or W shaped? Most of the smart money (including the RBA’s) seems to be settling on W shaped, with the potential for unemployment to rise in the short to mid term. The war chest the government accumulated to fight recession is still quite full, and the government has stated that it plans to stick to the large stimulus plan announced earlier in the year.

Recessions often to bring governments to think about major infrastructure projects. The U.S. went down this route mid century, with Congress having a few attempts at chartering a “National System of Interstate Highways” before Eisenhower made it a reality. I haven’t seen a figure for the investment required, but I expect it to be scary. The impact, though, was profound on the U.S. in general, and the economy in particular. Through the years, various estimates have been made of the contribution of the interstate highway system to the economy, generally finding that the interstate highway system has more than paid for itself in improved commercial productivity, with each dollar of investment in highways producing an annual reduction in product costs of 23.4 cents. It is estimated that the interstate highway system is now producing approximately $14 billion. All this from something you can use for free.

Fast forward to the future, and we can find an interesting report, Powering Ideas, recently published by the Australian government, outlining how what Australia might do to support innovation domestically. The report is quite long but at its nub, it points to a strategy of funding the infrastructure required by innovators it make it easy (and cheap) for them to innovate. This doesn’t mean that the government is getting out of the grant business, but it is an admission that the government doesn’t have a great track record of picking winners in this space. Cheap (if not free) infrastructure helps those grant dollars go further, while at the same time helping every innovator in Australia who wasn’t lucky enough to receive a grant.

Put the two of these together and it makes you wonder: what if they Australian government makes the the NBN free? Back in the 30’s the U.S. economy was driven by interstate commerce. Reducing the cost of trucking goods across the country (reducing the transaction costs) helped drive the economy forward. Today, in Australia, knowledge and collaboration are the back bone of the commerce. Reducing the cost of sharing information and collaborating has the potential to have a similar impact .

Like free and efficient roads, very cheap broadband access would help the entrepreneurs and innovators thrive. This would provide Australian’s with powerful platform to build businesses in a today’s knowledge economy. We could capitalise on the current trend for software-as-a-service (SaaS) startups replacing business process outsources (BPO), replacing a human labour driven solution is a software driven solution, servicing the world’s needs from our home base Research driven startups would have cheap and efficient access to the massive data sets which drive modern research, having the world at their fingertips.

You would probably still need to pay for the last mile, connecting your abode to the NBN backbone, but this is similar to the current energy delivery commitment from the government: they get the power lines to the property boundary, and then you pay someone to connect it into the house. Local ISPs could provide (or organises) the connection service, along with sorting out the home network and providing support. The NBN would also probably need to expand to include the link overseas, complimenting (or replacing) the network of links funded and managed by the existing telcos and ISPs.

And finally: where do the major Australian telcos fit in this? Interesting question. One probably better left to them to answer.