The Ongoing Productivity Debate

In my previous blog, I mentioned that productivity in Australia remains sluggish. There are various ideas as to why, and what we could do to improve performance. There are suggestions that traditional productivity analysis may track the wrong thing(s) – for example, output should not simply be measured against input hours, especially in light of technology advances such as cloud computing, AI, machine learning and AR/VR. There are even suggestions that rather than working a 5-day week (or longer), a four-day working week may actually result in better productivity outcomes – a situation we may be forced to embrace with increased automation.

Image Source: Wikimedia Commons

It’s been a number of years since I worked for a large organisation, but I get the sense that employees are still largely monitored by the number of hours they are “present” – i.e., on site, in the office, or logged in to the network. But I think we worked out some time ago that merely “turning up” is not a reliable measure of individual contribution, output or efficiency.

No doubt, the rhythm of the working day has changed – the “clock on/clock off” pattern is not what it was even when I first joined the workforce, where we still had strict core minimum hours (albeit with flexi-time and overtime).  So although many employees may feel like they are working longer hours (especially in the “always on” environment of e-mail, smart phones and remote working), I’m not sure how many of them would say they are working at optimum capacity or maximum efficiency.

For example, the amount of time employees spend on social media (the new smoko?) should not be ignored as a contributory factor in the lack of productivity gains. Yes, I know there are arguments for saying that giving employees access to Facebook et al can be beneficial in terms of research, training and development, networking, connecting with prospective customers and suppliers, and informally advocating for the companies they work for; plus, personal time spent on social media and the internet (e.g., booking a holiday) while at work may mean taking less actual time out of the office.

But let’s try to put this into perspective. With the amount of workplace technology employees have access to (plus the lowering costs of that technology), why are we still not experiencing corresponding productivity gains?

The first problem is poor deployment of that technology. How many times have you spoken to a call centre, only to be told “the system is slow today”, or worse, “the system won’t let me do that”? The second problem is poor training on the technology – if employees don’t have enough of a core understanding of the software and applications they are expected to use (I don’t even mean we all need to be coders or programmers – although they are core skills everyone will need to have in future), how will they be able to make best use of that technology? The third problem is poor alignment of technology – whether caused by legacy systems, so-called tech debt, or simply systems that do not talk to one another. I recently spent over 2 hours at my local bank trying to open a new term deposit – even though I have been a customer of the bank for more than 15 years, and have multiple products and accounts with this bank, I was told this particular product still runs on a standalone DOS platform, and the back-end is not integrated into the other customer information and account management platforms.

Finally, don’t get me started about the NBN, possibly one of the main hurdles to increased productivity for SMEs, freelancers and remote workers. In my inner-city area of Melbourne, I’ve now been told that I won’t be able to access NBN for at least another 15-18 months – much, much, much later than the original announcements. Meanwhile, since NBN launched, my neighbourhood has experienced higher density dwellings, more people working from home, more streaming and on-demand services, and more tech companies moving into the area. So legacy ADSL is being choked, and there is no improvement to existing infrastructure pending the NBN. It feels like I am in a Catch 22, and that the NBN has been over-sold, based on the feedback I read on social media and elsewhere. I’ve just come back from 2 weeks’ holiday in the South Island of New Zealand, and despite staying in some fairly remote areas, I generally enjoyed much faster internet than I get at home in Melbourne.

Next week: Startup Vic’s Impact Pitch Night

 

 

 

 

 

Startup VIC’s Retail & E-Commerce Pitch Night

As with the same event last year, this pitch night was again hosted at the Kensington Clik Collective. Going by the audience numbers, the retail tech and e-commerce start-up sector continues to generate widespread interest, despite (or because of?) the fragile state of most bricks and mortar retailing in Australia, and the onslaught of global online shopping from the likes of Amazon and eBay.

The four pitches in order of presentation were:

barQode

According to the founder, it all started with a scarf… and how he might have paid more for the item at the time he wanted it (but less than the retail price), compared to the eventual discount price a few months later. If only he had been able to bargain on the spot. Enter barQode – a location-specific app that enables customers to make an offer on an in-store item, and retailers to match or counter the customer offer.

To be clear, this is not (yet) a price comparison tool or even an on-line platform – it’s an app aimed at specific, location-defined, in-store purchases.

While simple in concept, the app does require a huge behaviour change by shoppers. Australians are infamous for being “price sensitive” buyers (not the same as being “cheap”, as one retail consultant once corrected me). Cost plays a huge role in purchasing decisions, especially as choice is often limited in a sector dominated by an oligopoly of brands, and a traditionally restricted market in terms of parallel imports and geo-blocking.

But barQode requires Australians to get comfortable with the notion of haggling, and that is quite a culture shift. Yes, some retail brands offer price matching against their competitors, but as this pitch pointed out, this is all about in-store purchases and prompting a more emotional engagement.

Most of the questions from the panel of judges focused on the competition, customer acquisition and market entry. Using a combination of platform fees and analytics services, barQode claims to be cheaper than the competing platforms, which also risk dis-intermediating retailers from their direct customers. Costs of acquisition were not disclosed, since the app is only in very select beta. The founders appear to be targeting discount retailers rather than selecting a specific category launch. This raises the prospect of only attracting bargain hunters who are already tempted by stock clearance offers (a race to the bottom?) – rather than engaging with select brands who can afford to yield some margin while potentially securing a new customer base.

The team claim to have a patent pending (they are working on image recognition, rather than simply relying on bar codes and other inventory data), and is seeking $350k in seed funding prior to a $1.5m Series A.

Epic Catch

Under the banner, “The social collective – date differently”, Epic Catch claims to be fostering organic connections via shared experiences for singles.

I have seen this start-up pitch couple of times before, where the initial emphasis was on being a new kind of dating service. But now, presumably with more experience and more market research, it claims to be addressing the “loneliness epidemic” – despite all the so-called “connections” people have via social media (and given recent events at Facebook, how much longer will that particular trend run?)  there is actually less and less personal engagement in the world.

According to data cited by the founders, in Australia, 35% of households consist of single people, a figure expected to reach 60% by 2036. At the same time, single people (neither age nor other demographics were defined) each spend an average of $12,000 a year on social activities. (It would have been interesting to see a breakdown of this spending pattern by consumer category, season, age, gender and location?)

The business model relies on a mix of subscriptions, commissions and affiliate fees, via a business partner model, member fees and booking fees. The founders are looking to raise $1.5m, primarily to fund marketing costs, as customer acquisition has mostly been organic, word of mouth, and SEO. To help them on their journey, the founders have appointed a solid advisory board, in their quest to counter the “fast food culture of dating and matching apps”.

Winery Lane

Winery Lane is a curated online market place, servicing independent wineries. Currently engaged on an equity crowd funding program (to raise $900k in return for 18% equity), the founders suggest that the $7.5b wine industry suffers from too many brands. A few large names dominate the market (by supply and by retail consumption), and a long-tail of boutique and specialist wine makers struggle for recognition (even though they often have a superior product). The biggest challenge is: producers can’t control the end distribution, especially small producers.

Winery Land has identified three core personas of wine lovers: geek, aspirational, and seeker. Their goal is to connect independent wine makers with this target audience, by removing the risk for sellers – through enabling them to share their wine-making narratives, and only charging a success-based commission on sales.

The business model is to target 50-60 independent wineries, and charge a 30% sales commission, while offering a 20% discount to customers on 12 or more bottles.

Asked by the panel (which included a representative from Vinomofo) about potential competitor Naked Wine, the founders claim they operate in different segments – in particular, their focus on selling genuine wines (and not running private labels).

Behind the platform is a data acquisition component – by “pooling” their mailing lists, participating wine makers can actually reach a larger (pre-qualified) audience. The judges felt that marketplace models for wine are still to be proven, and wine makers are naturally very protective of their customer lists, to whom they can usually pre-sell their normally small vintages.

[As a piece of random market research, the next day I spoke to one wine-seller representing a boutique producer at a pop-up market in the lobby of a CBD office building. He claimed that by participating in a growing number of these pop-up markets around Melbourne over the past 12 months, he had increased the size of their customer list 10-fold. When I asked whether his sales and marketing strategy included using platforms such as Naked Wine, his opinion was these services were often more like marketing software. They may also require producers to discount too heavily, that they resemble something of a bulk distribution model, and that it was akin to a “pay to publish” model for wine makers – based on the cost of getting stock on to the inventory. And while it isn’t perfect, MailChimp was good enough tool for building, engaging with and growing their customer lists.]

Postie

This SME marketing platform highlights a major paradox:  small brands engage better than big brands, but social media and e-mail engagement are both declining.

Using Instagram-based campaigns, Postie has doubled average campaign engagement to around 42%, and tripled typical click-thru rates to 6%. Postie has also reduced the time to create a campaign from 5 hours to 8 minutes.

While there is some template flexibility, there are limited options, as Postie draws on the Instagram design aesthetic.

According to the founders, there are 15 million brands on MailChimp, and 8 million brands on Instagram. What makes Postie different is that it owns its e-mail campaign client, and brands get to control their own retail inventory management.

Despite some of the challenges in SaaS marketing solutions, Postie has seen success with some specific verticals such as hairdressing, but admits that is hasn’t quite got the right product-market fit. As a result, and as a means to scale growth, Postie is starting to train users, to become more of a self-serve solution.

Somewhat surprisingly, the judges voted Epic Catch the winning pitch – I guess it is hard to ignore the founder passion, and the decision to pivot away from being a “traditional” dating platform. Meanwhile, the people’s choice (based on Twitter votes) was for Postie, and by a large margin – I suspect because many start-up founders, entrepreneurs and SME owners in the audience would welcome such a service for their own business.

Next week: The fate of the over 50s….

FF18 pitch night – Melbourne semi-final

As part of the Intersekt FinTech festival, Next Money ran the Melbourne semi-final of their 2018 Future FinTech pitch competition.

Ten startups presented, in the following order, in front of a panel of judges representing different parts of the Melbourne startup ecosystem:

BASIQ

Describing itself as “the future of finance”, and quoting the trendy mantra of “Data is the new oil”, BASIQ is an API marketplace for financial data. Designed to counter-balance “the Faustian pact” of big data, social media and search, and to compensate for the information asymmetry of bank-owned data, BASIQ espouses open banking, even though it is backed by two bank-related VC funds (NAB Ventures & Reinventure – see last week’s blog). With a focus on the needs of app developers, the commercial model is based on a licensing fee per user per transaction. Leveraging the AWS security layer (presumably to maintain privacy and data integrity), the pitch also mentioned “screen scraping” – so it wasn’t clear to me whether the data is only coming from publicly available sources? Currently, the platform only connects to financial institutions in Australia and New Zealand.

Breezedocs

A participant in the FF17 Semi-Final earlier this year, Breezedocs is a robotic document processing solution. In short, it can read/scan, sort and extract relevant data from standard documents that need to be presented by customers in support of a loan application. Operating via an API, it can work with multiple document types and multiple formats: data can be structured, semi-structured, or even unstructured. The benefits for lenders and brokers are reduced loan approval times and increased conversion, with much
better CX for the loan applicant as well. The goal is to help the standard loan origination process to go paperless, and could be extended to life insurance, income protection insurance, and immigration and visa applications.

Doshii

Doshii ensures that apps and POS solutions can connect to one another, via a common POS API platform. Apparently, there are 130 different POS providers in Australia, and many merchants use multiple services. Now backed by Reinventure, Doshii has a focus on the hospitality sector. The biggest challenge is physically connecting a POS to the API, so Doshii has developed a SDK. However, so far, only five of the 130 providers have signed up.

egenda

I hope I got this right, but egenda appears to be the new product name for the WordFlow solution for board agendas and meetings. Offering an “affordable web-based solution for every meeting”, the product is currently being trialed by a number of universities. The platform can convert PDF/word files into HTML, transforming and enriching them into a single secure website.
The panel asked how egenda compares to say, Google productivity suite or IntelligenceBank. A key aspect seems to be that egenda is platform agnostic – so it doesn’t matter the source of the document (or where it needs to be published to?). A key challenge in managing board papers is that it’s like herding cats – so a single but highly functional repository would sound attractive?

HipPocket

This US-based app is looking to launch in Australia. A phone-based financial decision app linked to a user’s bank account, it is designed to help with personalised goal-setting, budgeting and financial engagement. Asked whether it can support long-term goals, the pitch referred to data that suggests an increasing number of people are effectively living from pay-day to pay-day, and have no capacity to meet even the smallest of unexpected  bills. Having attracted a grant from the Queensland government, they are currently experimenting with different customer acquisition models, but they hope to prove that with daily engagement, it is possible to build a long-term relationship.

ID Exchange

With a tag line of “privacy protection power”, ID Exchange addresses a key issue of the “consent economy” – how to control who has access to your personal data, and how much, and for what purpose. With the whole notion of “trust” being challenged by decentralised and trustless solutions such as Blockchain applications; the plethora of data connections with the growth of IoT; and the regulatory framework around KYC, AML, CTF, data protection and privacy, there is a need for harmonised solutions. Under an “OptOut/OptIn” solution (from the website, it looks like this is a partnership with digi.me?), the idea is that users take more responsibility for managing their own data. ID Exchange offers a $20 subscription service – but unfortunately, based on the pitch, it was not clear what does this actually meant or included.

Look Who’s Charging

This is a platform for analysing credit and charge card transactions, to identify anomalies and reduce disputed charges. Currently with about 7.5% market penetration (based on merchant volumes?), it can help with fraud checks and spend analysis, by combining AI, crowd-sourcing and data science. But from the pitch, it wasn’t clear where the data is coming from. Also, a key part of the problem might be the data mismatch between card acquirers (merchant services) and card issuers (banks and financial institutions). Given that the growth in credit card fraud is coming from online shopping and CNP (card not present) purchases, it would seem that a better solution is to tighten procedures around these transactions?

Plenty

Plenty describes itself as a “financial GPS”, and is designed to address the issue of poor financial awareness. Only 20% of people see a financial planner, but now with robo-advice tools, even personalised advice can be scalable. Essentially a self-directed financial planning tool, it is free for customers to create a basic financial plan and when searching for a mortgages. For a subscription fee, customers can begin to access other products and advisors, which generates commission-based fees to Plenty.

Proviso

Another of these FinTechs to have featured in this blog before, as well as competing at FF17, Proviso makes “financial data frictionless”, in particular the loan application process. With 250,000 users per month, and 150 financial institutions signed up, their success can be ascribed to the way they standardise the data and the UX. Plus, they can access more data, from more sources, quicker. And then there are the analytics they can offer their institutional clients. In the future, there will be open banking APIs, plus insights, such as the categorisation of transaction types, affordability analysis, and decision-metrics.

Trade Ledger

This is a new platform that supports SME lending based on receivables, that also reduces the effort for SMEs seeking this form of financing. Given that cashflow issues are inextricably linked to insolvency risk, Trade Ledger has developed a unique credit assessment method, and is product-type agnostic. It also aims to offer automated solutions, with an emphasis on the digital UX of products, and use machine learning to generate a predictive probability of default (PPD). Currently the biggest challenge is in the multiple variations of bank credit and lending processes and models that need to be integrated or streamlined.

Of the ten pitches on view, I have to say that none really had a “wow” factor (although if Trade Ledger can scale their PPD model, and if ID Exchange spent a bit more time on defining their key message, both could be huge products). They were mostly worthy ideas, but still defined by current banking and finance procedures. Maybe these platforms need to do more with the transactional and customer data they generate or process, to uncover more opportunities. Or think about what they could do to disrupt adjacent markets? Anyway, on the night, Proviso proved the favourite with the judges.

Next week: Conclusions from the Intersekt Festival

 

Digital Richmond

How significant is one suburb’s contribution to the startup ecosystem in Melbourne, if not Victoria or even Australia? Well, if the recent panel on Digital Richmond (plus the Victorian Minister for Small Business, Innovation & Trade) are to be believed, VIC 3121 is the epicentre of all things startup.

According to the event description, Richmond (and the adjoining area of Cremorne) is “the stomping ground of choice for Melbourne’s established tech companies and aspiring start-ups alike”.

Hosted in the offices of 99Designs (celebrating bringing their HQ back to Richmond), a panel representing some of the biggest names among Australia’s tech companies (and all local heroes) explored what makes “Digital Richmond” tick – but also identified some of the challenges of growing and sustaining scale-up ventures beyond the confines of a few co-working spaces in converted warehouses and textile factories….

Facilitated by Rachel Neumann former MD of Eventbrite Australia (whose Australian HQ is in Melbourne), and briefly head of 500 Melbourne, the panel comprised some key Richmond/Cremorne tenants: Patrick Llewellyn, CEO at 99designs; Jodie Auster, General Manager for UberEATS in Melbourne; Cameron McIntyre, CEO of Carsales; Nigel Dalton, Chief Inventor at REA Group; and Eloise Watson, Investment Manager at VC fund Rampersand.

To set the scene, mention was made of other established Australian tech-based companies also HQ’d in Melbourne (MYOB and SEEK, the latter of which is also relocating its offices to Richmond), recent local successes such as Rome2Rio and CultureAmp (both born in Richmond), and the steady stream of global tech brands that have come to call 3121 their regional/national home, such as Stripe, Slack, Square and Etsy.

It was evident that each of the panel have previous business connections with one or more of their fellow panelists – so maybe there is simply value in being in close proximity to each other. Success begets success, especially when people are more willing to share connections and introduce new contacts into their networks. (Although, what might this say about diversity? And does it reinforce the notion that “it’s not what you know, it’s who you know”?)

Despite the number of co-working spaces and tech companies based locally, there are very few substantial, modern office buildings in the area, and only one business park of note. Local startups that need more space will likely have to relocate elsewhere.

Property aside, the panel considered other local infrastructure is generally conducive to success – access to public transport (although Richmond and East Richmond stations are both in serious need of an upgrade), a solid talent base, great coffee shops and proximity to the CBD.

On the downside, there was criticism at the lack of NBN access in such a concentrated pocket of tech companies and startups (with the associated numbers of contractors, freelancers and other members of the gig economy who live in the area and work from home). Car parking was also an issue, although with Richmond being a major public transport hub, I was surprised that this came up. A lack of child care facilities was also mentioned.

Being an inner city suburb, with strict planning laws and designated “heritage overlay” regulations, there are limits to the amount of development that can take place, especially as Richmond and Cremorne are also established residential areas, with medium to high population density. Getting the balance right between economic growth, urban renewal, modernisation and local community preservation is tricky – pity that the organisers had not thought to invite anyone from the local council.

The panel also bemoaned the absence of any tertiary education facilities in the area (by implication, does that mean the Kangan Institute campus in Cremorne doesn’t meet local requirements?). But maybe there are other ways to connect with academia?

The panel discussion then moved on to topics that are beyond the control of the local council or even the State government, yet each has an impact on the startup economy: corporate tax rates; employment visas; the schooling system; vocational education and training; and the need for inter-disciplinary and inter-generational hiring. (They may as well have added industrial relations laws, the productivity debate and smart cities – oh, and the National Innovation and Science Agenda.)

I was also surprised at one of the reasons given for 99Designs bringing their global HQ back to Australia – the appeal of an ASX listing. I know that Australia has one of the largest pools of pension funds in the world, and nearly every person in Australia has direct or indirect investments in Australian equities within their superannuation portfolio. But despite being ranked 15th by market capitalisation, the ASX represents less than 2% of the global market, and even after 25 years without a recession, Australia’s capital markets risk being left behind. If we are to grow the local tech sector, there needs to be much more alignment between where (and what type of) capital is needed, and where the pension funds and other institutional investors like to put their money.

Finally, I always get worried when the likes of Carsales, REA Group, MYOB and SEEK are held up as poster children for the local tech and startup sectors – great businesses, sure, but all about to be totally disrupted by the next wave of startups, and not quite the high-tech sectors that the Victorian government wants to champion (FinTech, MedTech, BioTech, NanoTech, AgriTech, Cyber Security, Smart Manufacturing, EduTech….).

Next week: The NAB SME Hackathon