Thoughts on ways to improve the management of professional services firms

Tuesday, October 18, 2011

The importance of simple questions in assessing technology

A week or so back I watched You've Got Mail with eldest daughter. Released in 1998, the film centres on a couple who meet via email unaware that they are clashing in real life. 

Kathleen Kelly (Meg Ryan) runs a small independent bookstore, while Joe Fox (Tom Hanks) is a member of the Fox family that runs a chain of mega book stores and is planning to open a store near Kathleen's. It's quite fun, but what struck me re-watching was just how quickly business models date under the impact of technology.

In 1998, the big issue was the survival of the independent book stores in the face of the mega chains. Thirteen years later Borders collapsed under the impact of the internet. The online challenge is especially pronounced in publishing and book selling, but it is affecting all aspects of retailing. 

Here in Australia, the Sydney Morning Herald reported today on a new survey suggesting that internet spending in this country would exceed $A37 billion by 2013. A week back in the continuing patent wars between Samsung and Apple, a Federal Court preliminary injunction that prohibited the sale of Samsung's Galaxy Tab 10.1 in Australia saw a surge of Galaxy sales as Australian customers used the internet to buy in other jurisdictions.

In quite a bit of my writing I have tried to warn about the excessive hype attached to new technology. For every business that has succeeded in a big way, there are many more that have failed.

Further, many firms outside the new technology areas themselves have done considerable damage to their businesses through the misapplication of new technology. Costs may have been cut, but at the expense of customers and customer loyalty. The Australian banks that cut their branch networks to save money had then to invest heavily in rebuilding those same branch networks.

One of the key points in considering the application of new technology is that initial impacts are generally less than expected, the longer term effects greater than expected. Computing and communications technologies do create businesses on the supply side, but it is the enabling effects of those technologies that have the greatest long term impacts.

Borders collapsed in part because its customers were enabled to buy books in new ways independent of bricks and mortar and specific store visits. In Australia, Borders survives as a pale online shadow of its former glory.     

I am not sure that analysis of new technology needs to be all that complex in a general sense, although specific applications may be very complex. The single most important questions are actually quite simple:

  • who will benefit from the new technology and how?
  • who might lose from the new technology and how?

Take the Australian bank case.

The banks were expected to benefit from bank closures because it would reduce costs. The losers were customers who lost access to the closed branches. In certain cases, transactions and transfers, customers did benefit from greater personal flexibility. In other cases, customers simply drifted away from the bank. The banks ended by losing because they weakened their single greatest asset, direct contact with a previously loyal customer base.

The business cases put forward within the major banks to justify their actions centred on the expected gains to the banks. "Hard" number could be attached to the proposals. The "softer" questions about customer reaction in the longer term were not addressed.      

Postscript

On the Samsung/Apple issue, see Asher Moses' $30m tablet black hole: Harvey Norman hits out at Samsung ban. Apple blocks Samsung, consumers but elsewhere, Australian retailers suffer!

Postscript 2

Just recording two things:

Thursday, October 13, 2011

Research in a total connect world?

I really wanted to record this one for later use.

I have now been involved at one way or another in the application of new technology for many decades. Now Orange has released a new research paper, What's left to Know, dealing with the impact of very large data sets. The report is subtitled research in a total connect world.

In writing the last sentence I almost made a major error. I wrote a total disconnect world instead of a total connect world. That was arguably a Freudian slip because it captured my reservations about some of the new approaches.

As I write, the Vice Chancellor of the University of New England (Professor James Barber) is continuing his campaign in favour of online learning. I quote: 

ONLINE education is revolutionising the way information is accessed to the point of redefining the roles of academic staff and casualising their employment - a trend of significant consequence to Armidale.

With the University of New England seeking to source internationally-based staff to direct its students over the internet, concerns of employment security in a casualised academic work environment have arisen on the Armidale campus.

UNE Vice-Chancellor, James Barber, would not rule out an increased casualisation of academic staff in Armidale, but wished to challenge the notion that permanent, full-time tenure was the only good mode of employment.

As I have argued in other posts, I have major reservations about the hype now attached to social media and the new communications technologies. I just don't believe the arguments. So far I have only scanned the Orange report, but it appears to contain some interesting material. I am interested as to how it might affect my present thinking.

Saturday, October 08, 2011

Australia's continued economic disconnection

Note to readers: While short, this post took a little while to complete. I am bringing it up at the original scheduled publication date.

Interesting piece from Lorenzo, A misbegotten Union – Guest post by Lorenzo, on some current problems in the EU with a specific focus on the Euro.

From a purely management perspective, it illustrates the difficulties created for all of us when Governments' stuff up.

I don't think that any of us would argue that the creation of the EU and even the Euro has not made some aspects of doing business in Europe easier. It is easier to operate in a more harmonised environment. Yet, and this is something Australian business groups pushing for national uniformity should consider, common rules can come at a price.

I intend to do an update post on the latest developments in the Australian economy. The headline point is that Australia remains to some degree disconnected from developments expressed in terms of global or large regional unit data.

Today's Sydney Morning Herald story Indian coal rush heads Australia's way illustrates part of the reason, Australia's resource base. Demand will continue. The only issue really is price. However, there is a little more to it than that.

One of the wisest Australian Government decisions in recent decades was that taken in December 1983 to float the currency, allowing market demand to determine its value.  As I have discussed here before, the highly traded nature of the Australian currency creates its own problems since, as happened recently, the value of the currency can move in ways not directly connected to local economic conditions. However, the floating currency actually provides a very useful buffer, one that Greece would now find valuable.

In the lead up to the global financial crisis, the US dollar value of the Aussie declined sharply, providing one measure of protection to local demand. If, and on worst case scenarios, demand would continue if at a lower price for Australia's agricultural and resource exports. In this event, the currency would be likely to decline in value. However, this would of itself have some domestic stimulating effects.

A floating exchange rate combines with a good budgetary position and low Government debt.

To my mind, Government debt is too low. It is actually quite hard to deny that Australia has been under investing in public infrastructure. Further, the obsession with public-private partnerships has actually skewed public investment in a way that doesn't make a great deal of sense. Yet all this said, I cannot deny that Australia's budget and public debt position gives the country a great degree of flexibility in current circumstances.