Bridging the Digital Divide

Posted on October 18, 2016 by Content in Context

Is there still a digital divide in Australia? If so, how do we bridge that gap? If not, how do we address the apparent chasm that is leaving some “digital have-nots” behind? Is it as simple as rolling out the National Broadband Network and equipping every school child with their own tablet device? Or is it also about creating a digital mindset to ensure everyone can take advantage of the educational, social and economic opportunities that the range of digital technologies has to offer?

Mobile phone internet usage is projected to keep growing. Source: Statista

Based on consumer research, we would appear to be a well-connected country, with a high concentration of PC, smart phone and tablet devices, if data from Roy Morgan is any indicator. However, some recent research by Scott Ewing of Swinburne University based on ABS data has suggested that despite the narrowing of the divide, there is a deeper disconnect among those who do not have internet access.

There are multiple factors contributing to this disconnect: socio-economic, age, location and education. I would expect that within 5-10 years, age will be a far less relevant factor in who does or doesn’t have access to the internet. You could also argue that with more people accessing the internet via mobile devices, and with the increasing number of free WiFi zones across our cities (cafes, shopping centres, office buildings), public institutions (libraries, museums and galleries) and transport infrastructure (plus the reducing price of data and storage), cost may not be as much of an issue either. And once the NBN is complete, the percentage of the population without physical access to the internet should likewise be much smaller.

So that leaves education – according to the ABS-derived data, the more educated you are, the more likely you are to access the internet. Should this infer that we aren’t doing enough to teach digital skills in the classroom? Or are we teaching the wrong set of skills? Or is it a bit like learning English grammar or applied mathematics – unless you use them in your everyday life, you soon forget them, and never remember why it was important to learn them in first place?

Computer science, programming and coding courses are increasingly being taught in schools, either as part of the core syllabus or as extra-curricular activities. Many pupils have to use tablets as an integral part of their school lessons. And some schools are also running hackathons and entrepreneurial projects to help students navigate the new world of work shaped by innovation, digital disruption and the “gig” economy.

The changing nature of work is challenging schools and parents to think about how we should be preparing pupils for the future. It’s not just learning about the technology (important as it is to study data analytics, automation, robotics, AI etc.), it’s also about understanding the context and the potential for what it can do. It’s also increasingly apparent that more and more of today’s students want to do work that is meaningful, rewarding, challenging and which helps connect them to their values and “purpose”.

I like to think that as part of a well-rounded liberal education, today’s pupils will receive:

a solid grounding in digital literacy (as important and as vital as the 3 R’s)
an awareness of how “digital displacement” (through automation etc.) may impact their chosen career path (even in ways which we cannot yet predict – we must assume it will happen, as no profession, trade or vocation will be totally immune)
an appetite for lifelong learning (as one of the ways to cope with the inevitable changes they will face)
a set of life skills that instill self-awareness, curiosity, resilience, empathy, flexibility and adaptability.

Finally, if we are to truly grasp why this ability to adapt and change is important, we only need look beyond the digital debate and ask why the National Innovation and Science Agenda is failing to cut through. In large part, the NISA message failed to connect with the general electorate because many people could not identify with it, and therefore it did not resonate with them. Just as “necessity is the parent of invention”, so adversity often needs to be the catalyst for embracing change.

Notwithstanding the economic, environmental and societal challenges we face, there is considerable complacency and acceptance that “she’ll be right” – especially within the political, institutional and corporate elites that claim to lead us. As long as so few of the main actors among these bastions of power and influence decline to change their own culture, behaviours and ways of doing business, then it’s not surprising that the public feels unwilling or unable to change.

So our only real hope is to empower the next generations to shape their own future, not to be constrained by our traditional notions of “job” (in my view, an increasingly outmoded economic unit of value….) and think for themselves as to what change they want to create with all the technology, resources and opportunities at their disposal.

Next week: My Extended Gap Year

A Tale of Two #FinTech Cities – Part 2

Posted on October 11, 2016 by Content in Context

It feels like the inter-city #FinTech and startup rivalry between Melbourne and Sydney is starting to get personal. The blow-up between Victorian Small Business Minister, Philip Dalidakis and Freelancer CEO, Matt Barrie over StartCon is perhaps the most strident example, but other discontent is bubbling underneath the service.

Let’s take a look at what’s actually been happening around #FinTech in Melbourne, and try to understand what might be the cause of this apparent disquiet:

First, the recently announced LaunchVic grants have been met with a mix of gratitude, bewilderment and some sour grapes, based on the people I have talked to in the start-up community. There was a sense of “jobs for the boys”, “usual suspects”, “who?”, and “yeah, good on ya”. Nothing new there, then, when public money is being handed out. High-profile beneficiaries of the initial A$6.5m of grants include FinTech Australia (as part of a major FinTech Conference to be held in Melbourne), FinTech Melbourne (which is now the largest group of its kind outside the US and UK), inspire9, Startup Victoria and Collective Campus.

Second, Stripe‘s CEO, John Collison was in town to celebrate their 2nd birthday in Melbourne. (This is the 3rd time in 2 years Collison has been in Australia – he must love what we are doing here? Or maybe it’s the Victorian government incentives that attracted Stripe to set up in Melbourne: see below.) This time around, there were some major announcements among the celebrations, including:

25% of Australians have paid for something online using Stripe
Stripe is launching “Connect” in Australia – making it easier for local businesses to roll out payment solutions in multiple markets overseas
Stripe continues to keep its APIs as simple and streamlined as possible – they even support Amazon’s Alexa voice recognition system

There was also a panel discussion with some of Stripe’s local clients, and a Q&A with Collison himself:

Andre Eikmeier from Vinomofo commented that payment solutions (like all technology) should be invisible, and just work in the background
Ben Styles from Xero explained that integration with Xero’s own APIs is critical, and that they have co-developed some products
Nicole Brolan from SEEK said that thanks to Stripe, her business is finally allowing clients to pay invoices on-line

Asked about innovation, Collison argued that mobile phone technology was the spur for services like Uber. However, he’s not especially engaged with Blockchain, as he does not see the use case. He thinks the next major innovation will be in medtech (telemetrics & wearables), and machine learning (speech and image recognition). As he said, “driverless cars are not just about the sensors but what the data is telling you. We know more about the health of your car than your own body.” He also had some words of advice to aspiring local entrepreneurs and startup founders:

Having a global or international perspective is determined by your markets, your competition, and access to specific talent pools.
It’s probably wrong to aspire to be like Atlassian – you need to understand WHY Atlassian has been successful, not WHAT it did or HOW it did it – which means getting back to core values and core purpose.

Third, as the Stripe celebrations started to kick off, across town FinTech Melbourne hosted an event starring Alex Scandurra, from Sydney’s Stone & Chalk FinTech hub. This was billed as a “pre-launch” for Stone & Chalk’s planned foray into Melbourne, and was part information session, part FinTech love fest, and part fan-boy hangout. Scandurra’s presentation was quick to point out that the “plan is not to bring Stone & Chalk to Melbourne, but to create Melbourne’s own Stone & Chalk”. (Spot the subtle difference?)

To its credit, Stone & Chalk is home to 300 people and 75 startups, has helped start 21 companies and create 150 jobs, and participants have collectively raised $100m in funding, although Stone & Chalk does not take equity. Scandurra also commented that FinTech is not an industry in itself – it is a horizontal that serves all industries.

There seems to be a lot of local clamouring for a FinTech hub in Melbourne. However, unlike the NSW government which has directly partnered with Stone & Chalk, I understand that the Victorian government is not prepared or able to “invest” in such a project – and certainly not before there is some private sector funding on the table.

Meanwhile, the founder of a rival payment system expressed his frustration that the Victorian government “sponsored” Stripe to come to Australia, but won’t offer similar support to local startups. Another FinTech CEO I spoke to was irked that Stone & Chalk would appear to be breaching its own mandate if it set up shop outside NSW.

In fact, could be argued that Stone & Chalk was established in Sydney to directly compete with Melbourne’s startup ecosystem. In large part, this is thanks to the huge success that the Victorian government continues to have in luring major tech companies and global startups to come to Melbourne. Names such as Zendesk, Eventbrite, Slack, Square, Stripe and now Cognizant.

If the debate over Stone & Chalk coming to Melbourne is about creating a local FinTech hub (whether or not the Victorian government tips in some money), we have to examine the need for such a hub. For example, is it simply a question of real estate, so that all the FinTech startups can be co-located in one place? If so, I would have thought that was easy to resolve: there’s a lot of empty office space, and Melbourne rents are cheaper than Sydney; also, a growing number of office landlords recognise the mutual benefits and knock-on effects of hosting co-working venues in their buildings.

We also have to consider if Melbourne’s existing FinTech startup eco-system/infrastructure is willing to come together to underpin such a hub. If so, what is the hub going to do? What is its purpose? What is the missing piece that the hub is designed to fill? And who/what/where is best placed to fill that need/gap?

Looking back, Melbourne has been the home of a number of FinTech businesses, that are now global public enterprises – IRESS, Computershare, Touchcorp, Novatti, for example – so there is obviously something in the local water (or coffee). For me, however, a key barrier for FinTech specifically, and startups more generally, is the inability to connect to institutional funds and investors (Clover being a notable exception?). Other obstacles include the stodgy procurement processes used by the public sector and many large corporations, which make it more difficult for startups to compete for work, and the reluctance by enterprise clients to try a local product or service unless it has been tested and proven elsewhere.

Finally, on a more positive note, it was very interesting to see that founders from Atlassian and Vinomofo are backing Spaceship, a new superannuation fund appealing to a younger, tech-savvy audience.

Next week: Bridging the Digital Divide

Food for thought at #StartupVic’s #pitch night

Posted on October 4, 2016 by Content in Context

There was something of a different flavour at Startup Victoria‘s pitch night for September – including the new beverage sponsors! – which may have been helped by the large crowd, and the more polished presentations (judging by the feedback).

Image sourced from Startup Vic’s Meetup page

I will comment on each pitch in order of appearance:

Studio Ninja

Studio Ninja is described as Client Management software for professional photographers. Aimed at the wedding industry, it also holds some appeal for other event planners, DJs, musicians, make-up artists, hairdressers, caterers and florists. But the primary focus is on weddings, and the specific needs of studio photographers, whose workflow is very particular (according to the founders).

Regular attendees at these pitch nights will recall similar CRM/project management tools for other sectors, such as architects and management consultants – which raises questions about how unique each profession really is?

In essence, the software handles lead management, invoicing and cashflow reporting. It is available via subscription, and integrates with payment systems such as Stripe and PayPal, and other service providers such as Uber, and will soon integrate with Xero.

With a reported 40 new sign-ups per day, and around 2,000 members (of which only 300 are currently paid subscriptions), the Studio Ninja team are aiming to grow to 10,000 users and revenue of $4m. Growth is being driven by strong SEO and organic discovery among photographers, and word of mouth referrals.

The panel of judges were interested to know how the software could be sold via peak bodies and professional associations, under a SaaS or white-labelling model, and what potential there is to integrate lead generation and referral solutions. The judges also thought that camera and photography equipment brands could offer a significant sales channel opportunity.

Deliciou

Something of a different pitch came from this bacon flavoured seasoning, which is actually bacon-free. (I should confess that I was once a vegetarian, but when I started to dream about bacon sandwiches, I realised I was missing out… Maybe if this product had been around all those years ago, things would have turned out different. But I digress.)

There was certainly no lack of passion in this pitch, and the founder had even made sure there were free samples to go around, so strongly does he feel about his product. With a 9% conversion rate from website visits, and 2,000 bottles sold this year, there is obviously a niche in the flavourings market for a “guilt-free” bacon experience.

A graduate of the Melbourne Accelerator Program, the founder has cleverly chosen to use a pop-up popcorn stall to generate market awareness, solicit customer feedback, and create visibility for a product that comes in a small jar, and will compete for valuable shelf space in supermarkets.

The business is seeking $100k in seed funding to expand the range of seasonings,
expand overseas, and to resolve issues with production lead times and logistics. But given the challenges in building consumer brands, especially in the food and beverage category, a better option might be to tie up with another snack food or convenience food brand, and use that vehicle for distribution and market reach.

Reground

Reground is another food-related startup, but this is all about recycling coffee grounds. The business turns coffee waste – which otherwise goes into landfill – into sustainable uses, thereby reducing the amount of methane gas released into the atmosphere.

With a waiting list of cafes who want to access the service (because cafe owners already pay their local council to take away the waste), Reground will divert part of those waste collection fees and can even help cafes save money. Reground also supplies community gardens with free material for their compost. Other uses for the coffee waste include mushroom production.

As well as offering waste assessment services and potential cost savings, Reground runs a newsletter and provides certification for participating cafes. There is also potential for this Melbourne-based business to go national and even to the USA.

They are also offering a customer app to support logistics around collection, and they operate their own van as there are council limitations on more waste trucks on our streets. Asked by the judges about scaling their business, the founders are considering to build their own waste processing plant. (After the event, I did a quick search, and found a similarly-named business in Canada.)

Allume Energy

Finally, Allume Energy, another sustainability business, this time in solar energy distribution. Or, in their own words, “Democratising access to renewable energy”.

As a social enterprise, Allume offers tenants easier access to cheaper solar energy. Basically, Allume contracts with the property landlord to provide initial funding to install and set up a solar system, and then tenants pay for their energy via a contract licensing system. In addition to working with community and social housing projects in remote locations, Allume also offers a shared system for apartment blocks.

Claiming to provide a 30-50% saving to tenants, Allume requires landlords to commit to a 15 year contract, with a 50% break fee (based on the initial installation and set up costs). Given some of the current challenges in renewable energy (weather events, phasing out of government rebates, and reduction in feed-in tariffs), this scheme to implement very local solar systems will no doubt appeal to landlords and bodies corporate.

And on the night, Reground was the people’s choice – probably because it was a simple but effective proposition, and it appealed to Melbourne’s environmentalists and coffee lovers alike!

Next week: A Tale of Two #FinTech Cities – Part 2

Putting a Price on Value

Posted on September 27, 2016 by Content in Context

In the course of my consulting work, I often work with clients (who are themselves consultants and service providers) to review their pricing models. The goal is to help my clients clarify what they are charging for, to ensure that both they and their own customers are comfortable with the price. What often emerges is that on its own, “time-based” pricing is becoming harder to justify, unless there is a clear understanding of the resulting value created and transferred.

Among some of the major consulting and professional service firms, there is a growing awareness that pricing based on billable hours alone is no longer sustainable. This in turn is forcing firms to review how they put a price on their work. They recognise the need to shift from billing clients for “time and materials”, to generating license fees and royalties for the use of proprietary IP, and to offering “XaaS” models that comprise a blend of “always on” retainer and actual service delivery, neither of which is wholly based on time or effort spent.

At the same time, many input costs are actually decreasing:

Reduced staff overheads via offshoring and outsourcing
Cheaper technology (although we consume more of it)
More open source tools and freeware available
Ubiquity of BYOD
Greater use of remote working, telecommuting and hot desks

What this means for the clients I work with is that they need to have a better grasp of the amount of effort applied and the level of expertise they deliver to their customers. If there are significant parts of the project costs that have to be measured by actual time spent, then it is important to make sure that the customer understands the effort required.

How else can consultants and professional service firms demonstrate value, other than by billable hours alone?

To begin with, clarify exactly what the customer thinks they are paying for. There can be nothing worse than consultants spending most of their time and effort on tasks or activities where the customer does not see a material benefit, or which the customer does not value.

Clearly, if there are measurable and quantifiable outcomes for the customer, then that is a good basis for demonstrating value. For example, direct cost savings to the customer, or reduced opportunity costs in terms of time to market or other factors. However, it may be harder to demonstrate the direct benefit of some qualitative outcomes, at least in the short term.

Some pricing models include a consultant “success fee” coupled to a share of revenue, profit or costs savings (which can be high-risk for consultants if they have no control over the implementation and execution). Other consultants are working with their clients to co-create products and services, which can generate standalone revenue streams from the shared IP. Others are adopting more collaborative approaches to consulting which build long-term value through the quality and nature of the relationships which are more like partnerships than transactions. This can remove the customer’s anxiety that the “meter is always running”, although such arrangements still require expectations to be managed through agreed boundaries and clear rules of engagement.

One model I use with clients is to figure out the nature (as well as the amount) of the value they are being asked to deliver, based on why the customer is buying, as much as what they are paying for. Some of the factors to consider include:

Risk mitigation – is the customer in effect buying an insurance policy, transferring their own risk, or reducing their exposure to risk?
Must have – is the customer having to meet a regulatory or compliance obligation?
Best practice – does the customer aspire to be among the best in their industry?
Competitive advantage – is the customer getting something unique or hard to replicate?
Peer pressure – does the customer need to meet a recognised standard or level of competence?
Situational – does the customer need to build or acquire appropriate skills and capabilities?
Urgency – is the customer willing to pay more for a speedier service? (This is one area where time-based pricing can still be relevant!)

It’s also important to understand how customers are funding their purchase. For example:

which cost centre is paying for the service?
what is the purchasing criteria?
what cost/benefit analysis has been done?
is there a specific budget allocation, or is it coming out of existing operating costs?

Of course, consultants are frequently hired to bring an alternative (and sometimes critical) perspective to their clients’ problems. In which case, getting an external opinion has value in itself, and the customer should accept there is a cost associated with having access to someone else’s brain – even if it is only for a few hours.

Finally, for an alternative perspective, I would refer to recent comments made by Ash Maurya (author of “Running Lean”, and creator of Lean Canvas) when he was in Melbourne. Talking about how to scale startups, he made the observation that, “selling time [as a consultant] is not scalable … There’s only 24 hours in a day.”

Next week: Food for thought at #StartupVic’s #pitch night