Will Cognitive Computing Disrupt the High-Skill Labor Market?

Striding along Omotesando Street in Harajuku, Tokyo in summer 2 years ago, I came across Pepper, an emotionally intelligent humanoid robot created by Softbank Robotics Holdings Group (SBRH) in one of its more grandiose Softbank Mobile stores. She greeted and guided customers through the shop. She danced to requests and wittily answered customers’ questions on topics which ranged from product information and weather forecasts to their love life.

In January 2016, IBM announced a collaboration with SBRH, which gave Pepper a cognitive computing system named Watson which allowed her to understand sophisticated semantic context through natural language processing and process a humongous volume of data including “dark”, or unstructured, data from social media, video, images and text. With her cognitive capability enhanced, Pepper can now provide customers with in-depth analysis of products and services based on their needs and personal information [See Pepper in Mizuho banks].

To be clear, prior to the collaboration, Pepper already had an artificial intelligence that uses pattern recognition to “read” customers’ feelings through their facial expressions and tone of voice. Pepper is also connected to the cloud where data is processed. This information accumulates as Pepper gains experience. So what, if anything, distinguishes Pepper’s original artificial intelligence with the new capabilities she received from Watson’s cognitive computing system?

Definitions are still being developed in this emergent field, but it would seem safe to say that artificial intelligence is a broader discipline that encompasses natural language processing, social intelligence and machine learning among other tools, many of which a cognitive computing system also uses. The most notable feature that sets cognitive computing apart from artificial intelligence, for now, would appear to be its relationship with users.

As Steve Hoffenberg pointed out: “In an artificial intelligence system, the system would have told the doctor which course of action to take based on its analysis. In cognitive computing, the system provides information to help the doctor decide.” For example, in the healthcare industry, IBM’s Watson is helping oncologists keep abreast of the latest developments in the field by scouring through unexplored research every day rather than telling the oncologists what they should do. In other words, cognitive computing augment human capability and further our expertise.

Any discussion about advanced cognitive technology inevitably leads to the question on whether robots will eventually replace human labor. An Economist report entitled “Lifelong Learning: How to survive in the age of automation”, which appeared in the 14th-20th January 2017 edition, provides useful insights on this question. According to the report, computer science and programming is the second most offered subject on massive open online courses (MOOC) like Coursera and Udacity.

Moreover, 49% of top paid job openings in America require candidates to have coding skills. Even marketing professionals nowadays might need to understand data analytics, SEO optimization or how to develop advanced algorithms. This suggests that many who follow traditional, linear, and “safe” career paths will increasingly feel the pressure to invest in technology skills.

So what will it mean if companies incorporate cognitive computing technology into their business models whereby computer systems generate insightful recommendations, visuals and graphs or process a million pieces of data in seconds? Do we still need to learn how to write code and algorithms if cognitive computing can do the job? Will today’s prudent learners of technology skills be looking for a new niche in the near future?

I recently had the chance to discuss this matter with Jason Wang, a director of Financial Services at Baidu China, after his talk on “Artificial Intelligence Disruption in the Financial Industry”. According to Jason, there are still many hurdles that we need to cross before cognitive computing or artificial intelligence systems will be able to do our jobs. Collecting the huge volumes of data that are needed to train cognitive computer systems, like IBM’s Watson, remains a mammoth task. Data scientists still need to refine unstructured datasets before it can be used. And professionals in every industry will continue to work closely with computers to solve problems for consumers, just like they always have.

It is time to adjust our mindset and focus on learning how to work WITH these new computer systems and allow them to augment our skills. Jason put it nicely when he said, “it will not be either or but both humans and robots working side-by-side in future decision-making processes”.

Anh Dang is a Master student of Analytical Political Economy at Duke University. Before arriving in America, she studied at Waseda University in Tokyo, Japan. She also lived briefly in Australia and Bangladesh. She is an aspiring management consultant and likes meeting people.

Wearable Technology: Implications for Entrepreneurs and Organizations

Imagine a world where one can rate the popularity of any individual from 1 to 5 using a mobile device. And in this imaginary world, these ratings are important for determining one’s employability, social status, and where one can live. Furthermore, each person’s name and rating is visible to everyone else through the use of a wearable contact lens. This world already exists in the Black Mirror episode, Nosedive, but is slowly becoming a reality in our world. It is not uncommon to run across people who are staring at their Apple Watch or Fitbit as you walk through the city. In fact, wearable technology is becoming an increasingly popular trend with 50 million wearable devices shipped in 2015 and an expected shipment of 125 million devices in 2019. These statistics suggest that many people are already incorporating wearable technology into their daily lives. So, in this article, we will investigate the implications of wearable technology on businesses and entrepreneurs.

Every business is looking for ways to continually improve the productivity of its employees. One research study found that the productivity of workers using wearable technology increased by 8.5%. This is a striking statistic. How are wearables doing this? Well, for example, companies like Boeing and Tesco use wearables to gather data about the time it takes to complete certain tasks. They can then perform analytics on these data in order to train their workers to be more efficient and productive in the workplace. Ultimately, wearables allow businesses to gather information on employee activities that have not been easily accessible in the past.

Productivity of employees is also connected to their health. This is particularly relevant in America, where improved employee health can allow businesses to cut costs associated with healthcare premiums. Many consumers of wearables use their devices with the intent of improving their health. In fact, 56% of consumers believe [pdf] that their wearable device will improve their fitness. However, even though wearable devices claim that they can improve health, there is no empirical evidence that demonstrates that they can. Studies show that almost a third of users will stop using their device after 6 months [pdf]. Until more studies come out proving that wearables improve consumer health or further improvements are made in wearable technologies, businesses should be wary of using these devices as a way to improve the overall health of their organizations. In essence, an investment into current wearables to improve employee overall health may not pay off.

Another challenge for wearable technologies is privacy. Even though wearables will allow organizations to gather data that was not easily obtained before, employees may object to having their data used for analytics by their organization. It will be important for organizations to prepare themselves to navigate these privacy hurdles before implementing wearable applications to gather data analytics. For example, organizations should be open and honest with their employees about which datasets they are gathering from their wearable devices. This will prevent employee dissatisfaction and potentially costly lawsuits.

Entrepreneurs should not only think about using analytics collected by wearables to improve their startups, but also be on the lookout for opportunities in the wearable technology market. Because of the potential for businesses to use wearables as a way to improve employee productivity and health, wearable technology is an emerging market that is rapidly growing to meet the needs of organizations. As of now, the wearables market is predicted to grow by 35% by 2019. These statistics suggest that there is a lot of potential in the wearables market for startups to develop new devices and applications. Ultimately, entrepreneurs that are looking for a growing market should consider investing in wearable technology and applications.

Thomas Beck is a postdoctoral fellow in the Department of Molecular Physiology and Biophysics at Vanderbilt University and co-founder of a digital mental health startup, and runner-up in the 2016 TechVenture Challenge for a novel therapeutic. Dr. beck serves as the president of the Vanderbilt University Advanced Degree Consulting Club.

Why International Business Degrees Are So Important

why-international-business-degrees-are-so-important

This is a guest post from Marguerite Arnold.

International business degrees, in particular the MBA, are of increasing importance in a world where globalization (no matter how you define it) is here to stay. If anything, despite the recent backlash against globalisation, international business people who have an understanding of different business cultures are far better prepared for the world that lies ahead.

Call it Globalization 2.0.

Getting an international business degree is important because it exposes you to different people and ideas in your classes that open your mind to how diverse individuals and teams organise themselves and get work done, which is inevitably influenced by different national cultures. Beyond that, an international business degree also opens ones eyes to new and creative approaches available for structuring companies, launching new products, and reaching consumers in new and more effective ways.

On another level, international business degrees are important because of their focus on real sustainability and how it can be achieved. This is not limited to so-called “green” sustainability (although this is an increasingly important aspect). It is understanding, quite literally, how your business translates into different languages, needs, markets, market structures and regulations.

This is even more true if you work for a global technology company.

Two recent examples: AirBNB and Uber.

Both businesses are American and, while expanding rapidly at first, they have both quickly found that the disruption they caused has eventually created huge roadblocks. In Germany, for example, both have been banned outright. As much as their business models were good at “disrupting” two very traditional industries in almost every country they entered, it was precisely this feature of both companies that caused their eventual banning in more than one market.

The export of American innovation absolutely is hitting its limits right now as national governments realize that, despite all the conveniences, there are significant negatives that come with the same that their economies just cannot absorb. And as a result, the US tech firms end up destroying the very innovation that they created in the first place. That is nowhere more obvious than in America itself right now.

Part of this conversation has been underway for decades. American companies (in particular) have found a home in almost every country. But with technology, market entry has never been easier.

In the U.S., the focus on deregulation since the 1980’s, and the ability of firms to create new technology faster than the ability of regulators to understand and regulate it is widely accepted (or at least has been up until now). How this will continue in the future, however, particularly combined with the rise of automation, is yet to be seen. To date, the ability of firms with hugely disruptive business models to change the game has been accepted domestically as a mark of American entrepreneurialism if not exceptionalism.

As the backlash against technology firms has reared its head, it is highly likely that this will be felt elsewhere, and in many places far beyond the boardroom. While misinformation is the focus of the current debate – starting with the algorithm-controlled world of editor-free curation of blogs and Facebook’s role in the distribution of “fake news” prior to the U.S. election – the broader issue is a backlash against the role of tech firms in society overall . Uber, AirBnB and the many digital work platforms for freelancers are all tech enabled business models spawned beyond the clutches of regulation – and which are now facing a global backlash.

For precisely the reason that “American innovation” has been resisted around the world and now even domestically, it is important to understand the current playing field and how things are rapidly changing. This is one of the most invaluable lessons an international business student can learn.

Marguerite Arnold is an entrepreneur, author and third semester EMBA candidate at the Frankfurt School of Finance and Management.

(Image Source: Global Business Technology)

Frankurt: Europe’s New Fintech Hub?

frankurt-europes-new-fintech-hub-2

This is a guest post from Marguerite Arnold.

Frankfurt is one of the oldest business centres in the world. From at least Roman times, the low-lying city, bifurcated by the welcoming River Main, has been a hotspot for global endeavours that changed the nature of many industries – including but not limited to banking. Mayer Rothschild, a courtier to the German king of Hessen at the time, used the famous freedoms of the city to launch a global banking empire in the 1760’s.

frankurt-europes-new-fintech-hub

These days, Frankfurt is not just Europe’s banking centre and home to the European Central Bank. It is also on the verge of leading another revolution – in Fintech.

Why?

The first is just geography. In no other city where Fintech has taken hold are the presence of financial types and large banks so concentrated in such a small place. Frankfurt is roughly the size of Charlotte, North Carolina (the second largest banking centre in the U.S.) However, its residents, few in number compared to other large and influential cities and banking hubs, are both highly international (40% of the city is from somewhere else) and highly financially literate.

Further, with Fintech taking hold as a revolutionary force in banking and insurance, the large banks here are considering how to transition in a digital world which will change their business operations and market footprint – and that is not limited just to corporate banks, but global powerhouses like the ECB itself.

Frankfurt is an increasingly dynamic hub of Fintech start-ups, with unparalleled access to large banks. Even in London and New York, both financial superpowers in their own right, Fintechs do not have the same ability to reach power brokers and decision makers so easily and directly.

Frankfurt is also home to a well-heeled group of investors – whether they be individual “angels” or family offices – who are looking, at this point, for the next digital growth story. That makes the city one of the best places to both live and pitch on a regular basis. The start-up scene itself here is relatively tightly knit but, critically, also open to newcomers. Most advertise meetings on the Meetup Platform. It is possible to go to (at least) one event every day of the week.

Cross promotion of different kinds of events is also beginning to happen as the scene begins to mature. While the opening of Accelerator Frankfurt marks the first of such entities, it won’t be the last. Free office space for promising start-ups is relatively easy to find.

Unlike Berlin, Frankfurt also promises to be a city that promotes the growth of more B2B financial endeavours. While there are digital entrepreneurs here with start-ups of every kind, the mix in Frankfurt promises to see an increasing slate of innovative business models challenging every part of the banking and insurance business (which in Germany are more tightly linked than almost anywhere else in the world).

The impact of Brexit is also likely to give the Fintech start up scene here a boost, although it is uncertain at this juncture how much of one and in what form. What it is likely to do, however, besides sending a flood of British expats, is create a banking industry itself that is ripe for change and innovation.

Frankfurt is also (relatively speaking) far cheaper to live and work in (certainly comparable to Berlin). There are regional trains, subways that line up with station platforms and even street trains (plus busses) that make this little gem on the Main a potential start up paradise.

Four hundred years after Rothschild revolutionized banking, therefore, on the banks of the Main, another age dawns that promises innovations that are just as earthshattering, albeit this time, digital.

Marguerite Arnold is an entrepreneur, author and third semester EMBA candidate at the Frankfurt School of Finance and Management.

(Image Source: Wikipedia)

Essential Features That Your Serviced Office Should Have

Essential Features That Your Serviced Office Should Have

It is very common these days for businesses of all shapes and sizes to use serviced offices. For smaller companies and startups, however, they are particularly valuable. If a young business wants to get off the ground fast, they can do so by paying a fixed rate fee to rent a fully equipped workspace. It gives them access to state of the art resources, without the associated expenses.

If you are currently on the hunt for a suitable serviced office, there are a few things that you need to keep in mind. It is not always easy to find an adequately supplied workspace that is also maintained efficiently, but it is possible to find both of these things. A great resource to see where you can locate your business can be found here.

This post provides some of the most essential features of a serviced office and will help you find one that is perfect for your business.

Prestigious Address

If you are willing to pay for a managed office space, you have a right to expect its address to enhance your own reputation. This is why location is key when it comes to choosing a serviced office. For young businesses, it can make a huge difference, because it replaces an unprofessional domestic address with a highly regarded corporate one. It takes a lot of investment to set up that first independent site, but serviced workspaces are a great way to feel the benefit even if a company doesn’t have the necessary resources quite yet.

Flexible Contracts

The rise of nomadic entrepreneurs has bolstered the need for a much more flexible corporate culture. Innovative new businesses no longer want to be tied to one city or even a traditional work schedule. They want the freedom to work on the move and respond proactively to developing market trends. Being unrestricted by administrative ties is a big part of this and serviced offices are an easy way to invest in the amount of security that works for you. If you don’t have to commit to a two year lease, you will have more flexibility to plan for a wider range of future eventualities.

Back Office Support

The best serviced offices are more than just blank spaces for businesses to fill. They also provide access to the finest IT, secretarial, administrative, and tech support. With a back office of this calibre, entrepreneurs and startups never have to worry about going it alone. They are just one phone call away from a highly trained and experienced team of advisors. Whether you need help greeting guests, operating IT systems, or organising files, all you have to do is ask. The clue is in the name – with a ‘serviced’ office, you should expect that all of your corporate needs will be met.

Leisure Spaces

Not all serviced offices provide access to a leisure or relaxation space, but it is an essential part of the work routine. Studies have shown, time and time again, that productivity suffers when people don’t take regular breaks. In order to work efficiently, you also need to give your brain a chance to rest and recharge. The best serviced offices come with outdoor leisure spaces, so that occupants are exposed to plenty of daylight. This keeps them alert, happy, and healthy for longer. Keep this mind when searching for your ideal workspace.

Alexandra Richards is an Australian business consultant, located in Perth. She takes a keen interest in the business structures and work culture of Perth based businesses. She has recently been working with Servcorp to help deliver tailored solutions to local businesses.

Man vs Chimp

Man vs Chimp

(Source: Flickr)

Humans and chimpanzeees (our closest genetic relatives) are both social animals that have the ability to form groups and communicate between themselves.

Why is it then that humans have populated the globe (7 billion and counting) while chimp numbers continue to fall (currently standing at around 250 thousand or less)?

A key difference between us and our close genetic cousins is our ability to use, control and reflect upon language.

Research has shown that chimps can learn, use and teach other chimps how to use sign language (an insight I picked up from Emeritus Professor Glenn Bassett‘s book “Word Play“). However, chimps don’t have the ability to use spoken language and, more crucially, codify that language in written form.

Spoken and written language are easy to take for granted because everyone who is currently alive was born after the invention of both technologies, however the implications of these technologies appear to be an important factor in explaining our ability to survive and thrive as a species.

Isaac Newton famously stated in the late 17th century that “If I have seen further, it is by standing on the shoulders of giants.”

In other words, Newton was acknowledging the important truth that his discoveries were dependent on the work of people who had come before him. People whose insights he was able to benefit from because they were communicated to him through written language.

It’s one thing to have this amazing technology available to you, and it’s another thing to appreciate and make use of it.

Here are three questions to get you thinking:

  1. What was the name of the most recent book you read?
  2. Do you keep a journal to record your thoughts and ideas? If not, why not?
  3. What was the topic of the most recent article you wrote or co-authored? Did you publish the article so that other people could read, share and benefit from your ideas?

Let me know your answers via email by hitting reply, or sending an email to tom [at] spencertom [dot] com.

The Psychology Behind Marketing Online Education

Psychology Behind Marketing Online Education

This is a guest post from Sarah Smith.

How do people decide which online university will meet their needs?

What drives a student to choose one option over another — especially when both schools have little name recognition?

No one decides on an online education based on a single advertisement or one aspect of a website. Instead, a multitude of psychological factors work together.

Every student is different, bringing personal priorities to the selection process. That said, it is possible to use psychology to decode the common factors. By understanding the thought process that goes into a student’s choices, an online program can grow its enrollment faster.

Let’s look at some of the key factors:

1. The Feeling a School Will “Work With You”

One of history’s most famous psychoanalysts, Sigmund Freud, posited that people are driven to seek pleasure and avoid pain. Prospective students want the “pleasure” of a great education and the opportunities it affords, but also wish to avoid the “pain” of failing!

Schools aimed at working adults should evince a compassionate, caring manner to make the threat of failure seem distant.

2. Social Proof as Evidence of a School’s Intentions

“Social proof” is a key concept in neuro-marketing, the fusion of neurology, psychology and marketing. To overcome their doubts about a course of action, most people prefer to see that others like them have succeeded before.

Testimonials associated with clear, smiling photos of a variety of students can be motivational.

3. The Right Visual Cues

Online schools can offer a variety of programs, from the humanities and social sciences to vocational programs. When visuals are congruent with a college’s offerings, students will be more inspired to commit.

Blue, gold, and gray are associated with “prestigious” subjects in the humanities, while red, white and green evoke the practical.

4. A Sense of Urgency or Scarcity

Deciding to go to college can be a leap of faith, especially for those who have not been in school for a long time. A sense of urgency can shake them up and compel them to take action.

Establishing and communicating clear deadlines for enrollment, along with a path to speak directly to an admissions counselor is likely to improve conversion.

5. Anticipatory Activity

Anticipatory activity” is a perspective-taking process people adopt when they want to modify their social role. For example, a student who wishes to graduate from college with good grades will usually try to adopt habits they think are associated with that success.

When a college website is written from a future-oriented perspective, with rich details relating to a student’s future success, it can help activate this process, and so would-be students may become more confident that enrolling is the right course of action.

All these tools rely on one central factor: understanding your audience.

Someone who wishes to achieve a degree in philosophy may be very different from someone who wants real estate training online. Although, if you visit NREL’s website (a company that provides online real estate courses for NSW) you’ll see many of the above techniques.

Although each student is different, they all fall into demographic categories that can be used to develop a detailed understanding of the “average” visitor. The better you understand that group, the more effectively you can tailor your site experience to their needs.

Sarah is a small business owner, and is currently learning about marketing using the internet. Aside from working on her own business, she likes to use social media, and read travel books.

Creation vs Appropriation

Creation vs Appropriation

(Source: Flickr)

What do the painter, the author and the tech entrepreneur all have in common?

They are all in the business of creation; producing new works for the benefit of their target audience.

And what about the professional gambler or the Wall Street prop trader?

They are both in the business of appropriation; placing calculated bets in order to appropriate more of what already exists in their direction.

Creation and appropriation are very different kinds of activities, and both can be extremely lucrative. But the truth of the matter is that while creation has the potential to leave everyone better off, appropriation typically doesn’t.

What kind of projects are you currently working on?

Pie or Cake?

Strategy involves defending your slice of pie, or growing it bigger.

Innovation involves saying, “hey, we have some pie, why don’t we bake a cake or some cookies to go with it.”

Some companies spend so much time trying to get more pie, that they never get a chance to enjoy a second dish.

Business (like life) should be enjoyed.

What’s on your menu this month?

Culture vs Strategy

Strategy involves understanding your current position, deciding on a destination, and charting a course from here to there.

Culture is about who you are, and why you do things.

Culture is arguably more important than strategy because, if you look at it over the lifetime of a product or an organisation, the culture is the only thing that will really matter. The strategy and the products are today’s strategy and today’s products, but over time the strategies and the products will change while the culture will remain.

Creating a successful culture won’t happen accidentally, but the key to creating a winning culture is to understand that culture matters.

And in the long run, it may be the only thing that matters.

The New Philanthropy: The Push For A Renewable Capital Innovation Fund

The New Philanthropy

This post is a collaboration between BROSO™ and Tom Spencer, and was originally posted on Truth Has No Temperature.

Why is the Australian venture capital industry almost non-existent and irrelevant on a global scale?

Three reasons:

  1. A massive misallocation of capital, particularly when it comes to Australia’s $1.7 trillion superannuation bolstered capital pool, the fourth largest capital pool in the world.
  2. An attitude of risk-lethargy that impedes any real innovation from happening within Australia.
  3. An ingrained fear of failure that extends to the commercial world and business start-ups, to the point where in Australia there is a very negative attitude towards anyone who declares bankruptcy, the net result of which is less risk-takers, less innovators, less venture capitalists, and most importantly less GDP growth and a diminished tax base.

Many of the start-up opportunities for venture capital exist in the digital or online space, and these ventures by their very nature belong in an international market. Failure of Australia to play in this global sandpit means that Australia is experiencing a flight of human and intellectual capital.

In order to have a functional venture capital industry you need quality start-ups.

So where do these come from, exactly? Generally in the US and Europe it is from within high-quality University programs.

So where are the incentives to start new ventures in Australia’s vibrant University culture? Perhaps the answer is that Australia has a much too generous University and accompanying welfare system that fosters a sense of entitlement and robs young Australians of the desire to create, or take on any risk.

Why does this matter?

With the level of imagination, commercial creativity and desire to innovate in Australia there are all the ingredients for a thriving startup culture and venture capital industry.

But of course there’s the other side to the coin: capital. This is where the Australian venture capital industry has bordered upon impotence.

They simply can’t seem to raise serious capital.

Here are the facts:

  • Total venture capital investment in Australia in 2013 was barely AU$150 million; and
  • Total venture capital investment in Australia in 2014 increased significantly but still only amounted to AU$516 million.

Compare this with the total venture capital investment in Europe and the US:

  • Total venture capital investment in Europe in 2013 was AU$9.5 billion (63 times the amount of Australian venture capital investment over the same period); and
  • Total venture capital investment in the US in 2013 was AU$42.3 billion (282 times the amount of Australian venture capital investment over the same period).

An interesting comparison is to consider the total investment by Chinese Investors in Australian residential property:

  • Chinese investors pumped AU$5.9 billion into Australian residential property in 2013 (40 times the amount of Australian venture capital investment over the same period); and
  • Chinese investors pumped AU$12.4 billion into Australian residential property in 2014 (24 times the amount of Australian venture capital investment over the same period).

But a lack of capital is absolutely NOT the problem. It’s where Australia is deploying that capital.

Australia has one of the largest wealth markets in the world. Australia’s capital pool has grown at an annual compound growth rate of 12% p.a. since 1992.

The unprecedented growth in Australia’s capital pool has obviously been underpinned by its superannuation system which requires a portion of all Australian workers’ incomes to be contributed to a retirement pension fund.

Are there unintended consequences of the private and public sector both ignoring venture capital as an asset class in Australia?

One of the unintended consequences of ignoring the venture capital industry in Australia is human capital flight. What we mean by this is that if the money is not available to invest in new initiatives and to enable young entrepreneurs to start and grow their ventures in Australia then many of these people will simply leave the country. If the government invests in 13 years of school education and then 3 to 5 years of university education only to see the best people leave the country, then this is a huge gift to the rest of the world and represents both lost opportunity and a huge drain on the Australian economy.

A lack of venture capital money means that it will be difficult for innovative young Australians to launch new ventures and manage to survive long enough to reach profitability.

Consider the enormous tax losses suffered by the ATO and the general reduction of the Australian tax base as a result of losing an entire multi-billion dollar asset class to another hemisphere.

Australia could realistically expect to have a $5 billion a year VC industry.

Now let’s make some assumptions about income tax, corporate tax, and GST.

Assuming there are 250 investee companies and on average each of them generates revenues of $20 million per year that equates to $5 billion in annual revenues overall. If the average company has 20% net margins, then this would produce earnings of $2.4 million and the government could hope to collect $180 million in corporate tax revenues. The government would also pocket $500 million in GST revenues (more than what the VC industry invested in Australia in 2013).

Assuming that salary and wages for each company represents 30% of gross revenues and that the blended income tax rate is 28% then this would also mean that the 250 investee companies would produce $420 million in income tax revenues.

All in all, the government is missing out on a potential $1.1 billion in tax revenues per year.

What are the problems with the ingrained culture of the Australian venture capital industry?

American VC funds are willing to invest serious money in early stage ventures because they know how profitable it can be.

The US sees more exits, at higher valuations, and the success of American VC funds has attracted more VC players, more money, and more entrepreneurial ventures.

Part of the problem in Australia is that there is less money available, which means that it is harder for Australian startup founders to get meetings with investors and harder for them to secure investment.

But lack of money is only part of the problem. Another problem is that startup founders typically have to work harder and wait longer to secure investment. At the early stage of a venture where every day counts, delays in securing funding can mean the difference between success and failure, and distract founders from the vital task of growing the business.

Lack of money and longer waiting times are not the only problems though. The main problem is that the Australian VC industry lacks the visionary mind set required to grow successful new companies in Australia.

In the States, the VC industry is enthusiastic about investing in early stage ventures, whereas the mood in Australia is sceptical and hesitant. American VC investors look for passion and market potential, and know that asking for financial forecasts from a seed stage company is pointless. Down under it is a different story. Australian investors typically require a full blown business model with financial forecasts, which is genuinely impossible to provide if the venture hasn’t proven its business model and doesn’t yet have any customers.

What is the New Philanthropy?

Philanthropy is defined by the Merriam-Webster Dictionary as the practice of giving money and time to help make life better for other people.

The push for a more significant, better funded venture capital industry in Australian can be framed as a type of New Philanthropy.

We believe business is about solving problems and delighting people, and this becomes viable when businesses manage to do this in a financially sustainable way.

In any case, the New Philanthropy is not a new concept: this is basically what Richard Branson already does when he says he believes in supporting new entrepreneurial ventures and to our knowledge he signed Bill Gates’ giving pledge on that basis, which means he is not conforming to the way that most people would delineate business and philanthropy/charity.

Australia requires the New Philanthropy, and the push for a Renewable Capital Innovation Fund.

By Benjamin S. Broso B.Bus LL.B (Hons) and Thomas D. Spencer B.Com LL.B (Hons) (Sydney) MSc Financial Economics (Oxon).
Tom Spencer Ben Broso

7 Insights On Crowdfunding From Oxford

Crowdfunding in Oxford

Crowdfunding is a growing trend that allows individuals, non-profits and start-ups to fund projects by raising money from the crowd using an online platform.

Last week I attended a crowdfunding discussion at the Oxford Launchpad with Jonathan May, CEO of Hubbub, and representatives from the development offices of various Oxford colleges.

Asking for donations from alumni is one of the things that Oxford’s colleges do best, but crowdfunding offers a new and largely untested approach.

Pioneering new innovations is not necessarily something that Oxford is known for, and so it was interesting to attend an open discussion between Hubbub’s co-founder and representatives from some of Oxford’s colleges including Melissa Gemmer-Johnson who was representing my own college, Green Templeton.

Here are seven (7) insights that I picked up from the discussion:

  1. Firstly, and probably most interestingly, although crowdfunding is nominally about raising money, one of the main benefits of crowdfunding, as seen by Oxford’s Somerville College, is that it can enable the fundraiser to communicate with the donor in a more personalised way by providing specific and ongoing project updates. Before the advent of crowdfunding this kind of personal touch was only feasible for very large donors (think £1 million or more) but crowdfunding makes it possible for even the very smallest donations;
  2. Hubbub’s Jonathan May was quick to highlight that Hubbub, in contrast to some other crowdfunding platforms like Kickstarter, provides a number of key benefits including (a) a white-label platform that lets the fundraiser use their own branding and marketing materials, and (b) data analytics which allows the fundraiser to identify donors and track where referrals have come from in order to generate new leads;
  3. The most effective way to raise funds, at least when it comes to talking with Oxford college alumni, is to tell them a story about what’s currently happening in college rather than directly asking for money, the money tends to follow;
  4. Repetition pays dividends. It is typical for a donor to hear about a project or fundraising campaign two or three times before they decide to donate;
  5. Long fundraising campaigns are not necessarily the best; two or three weeks was suggested as an ideal length for a giving campaign.  Most money tends to be given at the beginning of a campaign (by the consistent givers) and at the end of a campaign as the pressure mounts and the laggards come on board just before the deadline;
  6. Videos are an effective marketing tools; Hubbub’s Jonathan May indicated that projects which have videos are twice as likely to be successful; and
  7. Contributions lead to more contributions; Hubbub’s Jonathan May indicated that projects that lack friends or family to provide early donations are significantly less likely to reach their ultimate donation targets.

Libin’s Law

Libin's Law

(Source: Techworld)

Phil Libin, founder and CEO of Evernote, was one of the guest speakers during Silicon Valley Comes to Oxford which was hosted at Oxford’s Said Business School a fortnight ago.

As part of the conference there was a debate held at the Oxford Union, the world’s oldest debating society, the motion being “This House Believes that Humanity’s Augmentation with Technology Creates a Better World”.

The debate was a heated one, and Libin was a speaker for the proposition.

In making the case for technological progress in general (as you would expect from a tech founder), and for human augmentation in particular, Libin argued that “[t]he upsides of making people better and making people smarter will far outweigh the downsides.”

At the same time he was quick to acknowledge that some of the potential risks associated with human augmentation are likely to come true, and we will need to be prepared to minimise and mitigate these risks.

These risks were variously acknowledged to include (a) the creation of an unrivalled and potentially immortal tech elite, (b) the creation of artificial intelligence which has been characterised by Stephen Hawkings and Elon Musk as a technology with extreme downside risks, and (c) the creation of greater inequality worldwide since only the wealthy will be able to purchase augmentation technology in the early stages, and so they may gain a self-sustaining advantage over everybody else.

In response to the risks outlined by the opposition team including their references to Murphy’s law, Libin proposed a law of his own.

“The opposition talk very intelligently about Murphy’s Law … but there’s an alternative to Murphy’s Law, which I’d like to propose here. In fact, I would very much like from here on out, for this to be known as Libin’s Law … It’s the combination of Murphy’s Law and Moore’s Law. It says that the number of things that go wrong will roughly double every year and it’s for this reason that we need technology and that we need augmentation.”

Whether it be artificial intelligence, or some other form of existential threat like climate change or nuclear proliferation, are you inclined to agree with Phil Libin? Do we need to augment humanity in order to protect and save it from these escalating risks?

Australia Is An Innovation Laggard (Nigel Lake, Part 10 of 10)

Australia, The Innovation Laggards

(Source: Flickr)

This is the tenth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: There has been a lot of support given to entrepreneurs in the UK in the last few years which seems very promising. Do you think that Australia is perhaps falling behind in that area?

Nigel LakeNigel Lake: Australia is 11 hours ahead of GMT, and about 10 years behind at least.

It is not a question of “is Australia falling behind?” Australia is massively behind.

I moved [to Australia] in 2003 and was amazed by the almost complete lack of online anything. Wind the clock forward and the online businesses of the big companies are still terrible. So there has been an amazing lack of innovation.

[Pottinger is] quite plugged into the entrepreneurial universe here through the universities, through some of the people who have invested in those companies, and through the incubators and so forth. We have put a fair amount of time into trying to support the evolution of that whole ecosystem because we think it’s amazingly important.

[Australia has] a political environment where there is a significant disaffection with science in general. There is a real love of things which are steeped in the past. There is a great unwillingness on the part of business here to embrace things which are new.

The poster child for success is Atlassian, the tech company, which sold its product in 10 or 15 countries to dozens of large companies before an Australian company would buy any of its products.

They are based in Sydney and had a fantastic platform for making your own wiki. They had a similar platform for managing agile software development programs, which is now used in many large companies around the world. Australian companies were at the end of the queue, despite the fact that the company is actually based in Australia.

Tom: So it sounds like there may be a cultural issue that Australia needs to overcome. I know that after finishing university a lot of the smartest people either leave Australia or take plum jobs in the established order of things. There appears to be a missing segment of the economy which exists in the UK and the U.S. And that is, young people trying to change things and create new businesses.

Nigel Lake: You just need to look at the university world. In most countries around the world, university students are pretty radical and protest about everything all the time. I have never heard an Australian student protest about anything apart from whether the temperature of their cappuccino is quite right.

There is an endemic acceptance of the status quo as being nice and comfortable and really quite reasonable, which to a significant degree it is. But you don’t have a change the world mentality, and people who want to change the world, as you said, they just get on a plane and they go somewhere else where they feel more welcome.

The only way you can change Australia is by changing its leaders. And that is about political leadership and business leadership. It’s an absolutely massive endeavour to attempt to do that. The challenge is that the political leadership comes out of the party system, which is breaking down in Australia as it is in the UK, but it is hard to see where that inspirational change the world leader will come from in Australia.

Ongoing Innovation in Digital Media (Nigel Lake, Part 9 of 10)

Innovation in Digital Media

(Source: Flickr)

This is the ninth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: One of my friends used to work at a large management consultancy in Sydney and was involved with providing advice to The Australian on the implementation of its subscription model.

In my view the subscription model is a crazy model because on the Internet the things which are scarce are attention and the ability to connect with people. Content is very cheap and increasingly free.

How can it be a good strategy for large newspapers, which are in the business of content creation and distribution, to be restricting access to that content? Meanwhile Google, LinkedIn and others are producing huge amounts of content and giving it away for free. What are your thoughts on that?

Nigel LakeNigel Lake: I couldn’t agree more.

What many of these organisations have done is say, “look, we are a newspaper”, and the world is going digital so we need to place the newspaper online.

So they take the physical newspaper and then they put it into an Internet version which is still the exact same thing as the physical newspaper. All lined up around the masthead of whatever the title is, and it has sections which are the sections that they used to have before.

After about 20 years they realised that if you’re online you can actually have video in a newspaper, which is a very modern phenomenon. Papers like the New York Times still don’t have much in the way of video content which is kind of bizarre because it works really well on a 4G network.

They have just not in any way reinvented themselves for the digital world.

The challenge is that to do that properly and to be able to figure out what you should actually do, you need to understand the media industry and what it is that people actually want to go and read. Secondly, you have to understand what makes a profit and what makes a return on capital. And thirdly, you need to understand what is really going on in the evolution of technology and where will it take us.

This goes back to why we set up Pottinger in the first place. If you have a strategic consulting set of skills but you don’t have financial or transaction skills then you only have part of the equation. And if you’re an investment banker who likes doing deals then you only have part of the equation. So we brought together the whole strategic thinking mindset with very robust financial analysis and over time we have added the big data analytics piece so that we have a much more holistic view of what you need to do.

In the world of media the technology part is incredibly important.

The lack of understanding about what is really going on in technology in some of these large media companies around the world is mind blowing. It’s almost impossible to put into words how little they know.

Tom: I couldn’t agree more.

Nigel Lake: Just on newspapers, the one that is very interesting to watch is The Guardian.

The thing that The Guardian has done which is very interesting, beyond the fact that they don’t have quite as many amazing typos as they used to, is that they are the world’s first global newspaper.

They have the full editorial staff in the UK, they have a pretty decent editorial staff in the U.S., and they now have quite a strong editorial staff in Australia having picked up some of the better journos who got kicked out of other things. They have a model which is free in terms of ability to access the content, and they have still retained a level of focus on the quality of the writing.

This is the other part of the media journey that newspapers have been down, which is they’ve said, we have got to get online, everything is so cheap online, we’ll just make the content as cheaply as possible. And the underlying business is really profitable because people come there and click on all the ads. But the thing is people don’t go to a newspaper website to read the ads. And so, if the content is not what people want they will just go somewhere else. Particularly if they have to pay for it, then they will definitely go somewhere else.

The Guardian has followed a different model which is about saying we’ll try to keep the quality of the journalism up, we’ll provide a much broader view of the world, and it’s not a subscription model at this point in time. Well, it’s a subscription model for things like the crosswords which is kind of interesting.

For me that feels like intuitively a model which is much more likely to be successful. Now I have never worked with The Guardian and I’d love to get under the hood of their profitability and metrics on usage and so forth. But they are an example of a paper which is going the other way, and I’d be interested to see whether it is working for them.

The Need for Continual Innovation (Nigel Lake, Part 5 of 10)

Continual Innovation

(Source: Flickr)

This is the fifth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Nigel LakeNigel Lake: If you watch what happened with the iPhone. Jobs had very particular views about the size and shape of phones. The iPhone had evolved quite significantly over time but it was still basically a very similarly shaped device.

When Jobs died the whole organisation sort of thought, we’ve just to keep on making the phone the same way because that’s what Steve Jobs would have done. But that wasn’t really who he was because he was someone who was continually reinventing all these things.

Apple got into a really pretty dark place with the iPhone 5, which just looked so kind of yesterday, and then impressively re-discovered its mojo and ability to say, look that was yesterday and we have to reinvent ourselves. They then created the iPhone 6, which is a tremendously good product and has sold incredibly well.

Tom: So they weren’t responsive to the needs of customers and what people were telling them.

Nigel Lake: That’s right.

People in senior roles got sort of hung up on “there was this guy, and he told us to do everything, and that’s what he would have told us to do” without realising that the world had moved on.

[Steve Jobs] was someone who could do something one day very very passionately, and then have the kind of whatever it takes to say, “that was then and this is now and the world has changed, and maybe we should think differently”.

When he died it left quite a shadow over the organisation but it has somehow reinvented itself. If you think about what happened the first time around when Jobs was booted out, it was a complete disaster. This time around they have managed to continue, reinvent themselves, reinvent the phone product, and bring the watch to market to what seem like quite strong reviews so far.

Tom: I guess it’s yet to be seen how things will play out. One question mark over Apple is that Tim Cook is an operations guy whereas the whole company’s magic is based around innovation, being nimble and being willing to change.

Nigel Lake: It’s going to be an amazing story to watch for the next five years or more to see what happens to that business.

It’s a fascinating thing, because on the one hand it’s hard to think of organisations which have really dominated some particular segment that have survived radical innovation in their segment. And yet on the other hand, you look at the world’s largest companies from a few decades ago and there haven’t necessarily been huge changes in those names. But that’s partly because things like oil and gas are still very big industries.

It’s starting to change quite rapidly now.

Elon Musk Debuts the Tesla Powerwall

A revolution in energy technology? Elon Musk launches the Tesla Powerwall

Elon Musk, CEO and product architect at Tesla Motors, has just announced the launch of the Tesla Powerwall. Musk was a co-founder of Paypal with Peter Thiel (who I talked about yesterday), and has since gone on to found Tesla Motors, SpaceX and SolarCity.

The new product is a home battery that represents a potential revolution in energy technology. It is designed to store around 10 kilowatts of energy, and could be used (in combination with solar panels) to take homes off the grid.

Solar power is likely to be part of the solution that frees us from our dependency on burning fossil fuels.  The big catch with solar power though is that the sun doesn’t shine at night. The Tesla Powerwall is a wall mounted battery, and so if used in combination with solar panels, it could allow people to satisfy their energy needs without relying on grid energy.  This is significant because grid energy is often produced by burning fossil fuels which produces CO2 emissions and contributes to global warming.

It will be interesting to follow the evolution of this technology in the months and years to come.  We could very well be witnessing the initial steps in a global energy revolution.

Peter Thiel at Oxford’s Said Business School

I had the good fortune yesterday to attend a conversation between Teppo Felin, Professor of Strategy at Oxford’s Said Business School, and Peter Thiel, co-founder of PayPal and recent author of the bestselling book Zero to One: Notes on Startups or How to Build the Future.

Apart from being a co-founder of PayPal, Thiel is also known for being the first outside investor in Facebook, taking a 10% stake in 2004 for $500,000. He now sits on the company’s board of directors.

As if that weren’t enough, Thiel is also:

  • Co-founder and chairman of Palantir, an American software and services company;
  • President of Clarium Capital, a global macro hedge fund;
  • Managing partner of Founders Fund, a venture capital fund with $2 billion in assets under management;
  • Co-founder and investment committee chair of Mithril Capital Management, a global investment firm; and
  • Co-founder and chairman of Valar Ventures, a globally oriented venture fund.

Needless to say, I didn’t want to miss this conversation with one of the world’s tech startup demi-gods.

Below I highlight ten (10) of the key lessons shared by Peter during the discussion.

  1. When it comes to teaching entrepreneurship and innovation there is a certain paradox.  How do you offer a formula for how to do new things? Science always starts with experiments and every moment in the history of technology happens only once. For example, the next Gates won’t create an operating system and the next Zuckerberg won’t start a social network.
  2. A lot of great entrepreneurs have certain diametrically opposed personal qualities. They will be, for example, people who are very stubborn but yet still quite open minded.
  3. Imitation is how culture is built, but it is also how things go wrong. People who are hyper-socialised (for example, business school students) are more likely to follow the big social trends and more likely to be talked out of their truly interesting and original ideas before they are even fully formed.  Innovation requires a certain willingness to buck the trend.
  4. In a company, you want to unite people around a common mission which differentiates the company from the rest of the world. For example, Elon Musk’s company SpaceX is the only company aiming to go to Mars.  At the same time, within the company, you want the roles to be as differentiated as possible. Conflicts tend to arise when people’s roles are too similar.
  5. There is not enough time to A/B test every idea you might have.  We live in a world which is far too skewed towards A/B testing, and not enough towards mission driven and vision driven companies.
  6. If you define the culture of a company the way an HR person would, then that’s probably evidence that you have no culture at all. You shouldn’t think of a culture as “having foosball tables and lava lamps” or anything generic like that. You should define culture around the common mission of the company.
  7. Assuming it were possible to reduce innovation to a formula, Thiel says the three part formula for a successful startup would be to have (1) a great team, (2) some great technology (because Thiel is a tech investor), and (3) a good business strategy.
  8. A startup should have a great team, and the team should in fact be a team. You need very talented people who can work well together. Preferably people who have known each other for a decent period of time, and who have complementary skills. When it comes to finding a startup co-founder, Thiel notes (tongue firmly in cheek) that “you don’t want to get married to the first person you meet at the slot machines in Las Vegas”.
  9. Business strategy is about having a story which explains how the startup will move towards building a monopoly. You can have a great team, and great technology, and no business at all. If your business creates X dollars of value and you capture Y% of X, most people forget that X and Y are independent variables. In most cases Y equals zero percent (0%).
  10. Investment capital is often deployed in extremely inefficient ways. Thiel notes that there is a very big difference between investing your own money, and investing other people’s money.  When you invest your own money, you are just trying to generate good returns. But when you invest other people’s money, you have two objectives. Number one is to get good returns, and number two is to look like you’re going to get good returns.  And the disconnect between those two can be much larger than people would typically think.

Ready or Not

The Consulting Industry is Ripe for Disruption

Ripe for Disruption

(Source: Flickr)

ACCORDING to the Harvard Business Review, the consulting industry is one of the most resistant to change. Even though consultants are brought in by corporations to innovate and shake things up, the consulting industry itself has been slow to innovate.

At its core, the consulting industry has remained the same for more than 100 years. Meanwhile, new tools and technologies have become increasingly sophisticated and available.

This begs the question, “why hasn’t the consulting industry been reinvented?”

CONSULTED, a company run by CEO Sebastian Sager, have not only asked this question but are also taking action, and may be on the cusp of profoundly changing everything.

Using a non-traditional business model, CONSULTED is on a mission to give companies access to expert consulting without the long-term commitment or initial expenses.

Traditional Consulting

Traditional consulting is perfect for enterprise businesses that have massive budgets, constantly “creeping” needs, and a particular business structure which is difficult to change. But even so, engaging a traditional consulting firm often only makes sense if the consultants are used to the fullest.

The issue with traditional consulting is that it doesn’t work in all cases. Very rarely do businesses – big or small – use the full consulting retainer. As a result, money that gets paid to consultancies could have been invested in other areas of the business.

The startup world is rapidly changing the way that businesses operate. For example, it is now easy to find credible, highly regarded contractors to fix your house through online tools like Angie’s List.

Why aren’t the same resources available for helping businesses get advice?

Many founders and mid-level managers don’t need a long-term consulting contract – they’re just looking for some quick, credible advice to guide them through a problem situation or challenge.

Credibility is key, but you shouldn’t have to pay an arm and a leg for it. Consulting should also be flexible so that people can get the advice they need by scheduling a quick phone call or discussion via Skype. You shouldn’t need to “know a guy” or have a contract in place to get the help you need.

A New Era of Consulting

It’s finally time for a fresh new approach to consulting – something that is designed to truly help businesses.

Enterprise-level clients are starting to look at changing the way they engage consultants. Professional service companies in the past charged high fees for standard service packages, making them unsuitable for companies that needed a more discrete piece of advice.

Many newer consulting firms are addressing this pain-point by offering smaller and more flexible consulting “blocks” and flexible collaboration packages so that companies can get on-demand consultancy on topics ranging from audits to Lean Six Sigma to strategic planning. This is a step in the right direction, but a whole new consulting model appears to be on its way.

Companies like CONSULTED are developing solutions which allow clients to forget about meetings, memos and all the other unnecessary hassles that come with engaging a major consulting firm. They also allow users to browse a range of experts from around the world, review consultant credentials and save money by paying for only the time they use.

Is this a disruptive innovation? How is this new consulting model likely to affect your business? Share your thoughts in the Consulting Forum.

Breaking with Experience

Innovation involves breaking with the past to create something even more remarkable

Innovation Experience

(Source: Flickr)

THE traditional Experience Curve focuses on increasing production experience which leads to predictable cost reductions.

This kind of experience is relevant in industries that are relatively stable, competitive, and production-intensive.

Experience Curve Example

(Source: Wikipedia)

But what about high tech and creative industries where the lifecycle of a new product is only a couple of years? And what about pretty much every industry nowadays from music distribution to taxi services, which are open to disruption from fast moving well-funded digital entrepreneurs?

In many industries production experience is becoming less important than innovation experience, the track record of being able to consistently break with the past to create something even more remarkable.

To highlight the distinction between “production experience” and “innovation experience” you only need to look at Apple.

Under the leadership of Steve Jobs the company created a string of amazing products which opened up entirely new product categories: the iPod, the iPhone, the iPad. Apple’s strength does not rest on its production experience and, in fact, the company outsources much of its production to Foxconn, a Taiwanese electronics contract manufacturing company.

What about you and your business?

Are you learning how to break with the past, or focusing on creating more of the same but cheaper?

Stretching the Mind

The mind is a muscle, and meditation is a form of stretching

MOST PEOPLE wouldn’t find it strange if you told them to stretch their muscles before running a race.

Stretching limbers up the muscles, increases performance, and reduces the risk of injury.

And yet, and yet, every day people around the world turn up for work and run a mental race in which it never occurs to them to stop and stretch.

The mind is a muscle, and meditation is a form of stretching.

The problem with meditation is that many people believe it’s not for them. Meditation is for hippies and prayer is for religious folk, the thinking goes, and if you don’t fall into one of those buckets then you are likely to dismiss these practices altogether.

In the cut and thrust of the corporate world, meditation is often seen as a soft idea, the kind that may get you ridiculed or fired, the province of bohemians and tree hugging pinko lefties.

Easy, easy, there is no need for name calling. While it may be true that meditation is warmly embraced by creative types, that may just be because it actually works.

Your author is no hippie. A former lawyer with his fair share of war wounds and battle scars, he is also open to new ideas.

And so, and so, to see whether meditation may have anything of value to offer, we have been trialing it for the last two weeks using a very simple book of Chinese origin called The I Ching

The results are nothing but positive.

By taking 10 minutes out at the start of your day, 10 minutes before starting back after lunch, and 10 minutes before going to bed, you can relax the mind, reduce stress, increase productivity, and decrease the number of hours you need to sleep each night.

It is working for us.

Try it for yourself. There are lots of free meditation resources available online. We are interested to hear how you get on.

Report back with your results, and share your experiences in the consulting forum.

Corporation Oxford

The illusion of permanence, and the persistence of innovation

Corporation Oxford

(Source: Tom Spencer)

IN a recent FT article, Chairman of Risk Capital Partners Luke Johnson made some interesting comments about his alma mater, Oxford University:

Oxford University, my alma mater, is a classic case of a complacent establishment that is refusing to reinvent itself. It will consequently find life much harder in the 21st century. Britain’s finest educational name … ignores the explosion in online learning and fails dismally to exploit its intellectual property commercially … It lives off past glories, and is doomed to fade unless it reforms vigorously.

Johnson is arguing that Oxford needs to reinvent itself, and refuses to do so. After 800 years as one of the world’s leading educational institutions, Oxford has lost its way.

The Case for Reinvention

Universities are not normally candidates for “reinvention”, and so in making his claim Johnson appears to be likening Oxford to a company, “Corporation Oxford”. We take it that Johnson’s position as the partner of a private equity firm makes him well qualified to comment on the business of education.

The language of capitalism focuses on efficiency and optimisation, and if these are the measures of success for a university then Oxford is failing badly. Oxford’s tutorial system, collegiate model and arcane administrative processes are expensive, and if Johnson were in charge we imagine he would dispense with them directly.

Oxford has often been accused of ivory tower elitism and of being resistant to change, and there is more than an element of truth in these claims. 

Oxford’s long history and strong reputation mean that top down organisational changes happen slowly. After all, the Oxford dons have more to lose than to gain by making hasty changes to a system that has stood the test of time.

But while the sandstone buildings may give the illusion of permanence, under the surface Oxford is a hive of activity and continuous change.

The Persistence of Innovation

In recent years, Oxford has been drawn into the heart of the business, technology, and entrepreneurship world by a small and committed band of innovators.

They include a few well known faces and more than a few unsung heroes.

Here are just three examples of the steps that the trailblazers have taken so far:

  1. Said Business School: Established in 1996, Oxford’s Said Business School is one of the newest and most entrepreneurial business schools in the world. Dean Tufano, former HBS Professor, reinvented the traditional MBA program by introducing Oxford’s 1+1 MBA, a course that allows high potential leaders to combine the depth of study of a traditional MSc degree with the breadth of an MBA. Dean Tufano also hosts an annual event known as “Silicon Valley Comes to Oxford” – a unique forum that brings the world’s leading tech entrepreneurs to Oxford, and gives the next generation of business leaders an insider’s view on how to start, scale and run high-growth companies.
  2. Oxford Entrepreneurs: Founded in 2002 by British entrepreneur Alex Hearn, Oxford Entrepreneurs is now the largest student entrepreneurship body in the world. The society encourages innovation, and helps its members build the kind of social capital that cash strapped entrepreneurs need to bootstrap their businesses. The society is currently run by a new generation of innovators (John Stringfellow, Ridhi Kantelal and others) who last weekend hosted Oxford Inspires, an entrepreneurial conference designed to inspire innovation. Luke Johnson himself was a guest speaker at the event.
  3. Oxford Launchpad: Opened only a fortnight ago on February 17th, the Oxford Launchpad is a new breeding ground for entrepreneurs that has already spawned a number of start ups including The Renegade Times (a grass-roots publication for tech entrepreneurs spearheaded by Srin Madipalli), and a yet-to-be-named educational gaming platform (led by Charlton MakVictor Repetsky, and Shubham Anand).

But while the bottom up innovation continues, that doesn’t mean Oxford can rest on its laurels any time soon.

Room for Improvement

There is a lot of room for improvement at Oxford, and in your author’s view this would include a more ambitious adoption of online learning.

Johnson claims that Oxford is “doomed to fade unless it reforms vigorously”. And while his prediction may be a bit half baked, Oxford does need to understand and respond to a quickly changing educational landscape.

With the rise of online learning, it may soon be possible to buy good quality degrees online for a modest fee.

The question is, will this threaten Oxford’s business model?

Online learning presents big opportunities and threats for the established players, and here are two thoughts for Oxford to bear in mind.

1. Substitute for Bricks and Mortar

The way things are heading, it will soon be possible to undertake an entire degree online composed of courses from top universities. It is already possible to get a Certificate for an individual course.

For many young people, especially in America where the cost of tertiary education is highest, this will provide a compelling alternative to attending a bricks-and-mortar university.

With lower cost structures, online players will be able to undercut traditional universities on price. A scary prospect for second and third tier universities that may be unable to offer their students a strong enough community or a strong enough brand name to justify their higher fees.

How will these changes affect Oxford?

In the short run, we expect the effect to be negligible. The students likely to sign up for an online degree are not the same students who are applying to Oxford.

In the medium term, the availability of quality online education could even benefit Oxford. Increased competition at the bottom end of the market could help to destroy second and third tier universities, and thereby leave Oxford and other leading universities with the market for bricks-and-mortar tertiary education all to themselves.

Does this mean that Oxford is safe to sit by and watch the changes unfold around it?

Not quite.

2. Disruptive Innovation

Online learning is currently inferior when compared with the bricks-and-mortar alternative because it provides students with content without the community and without the established branding of a real world university.

But what would happen if Coursera created a bricks-and-mortar campus of its own? Or, perhaps, created small study hubs in every town where students could meet and collaborate?

HBS Professor Clay Christensen teaches about disruptive innovation, a process by which an inferior product can initially take root in simple applications at the bottom of the market (e.g. Coursera offering individual courses online) and then move up market to eventually displace established competitors (e.g. Oxford and Cambridge).

Disruptive innovations are typically inferior products when compared with the products offered by established players. But they are able to gain a foothold in the market because they are simpler, more convenient, more affordable, and for customers who can’t afford all the bells and whistles, they are better than nothing.

Christensen explains that in previous waves of disruptive innovation, the only companies that survived were the ones that created a new business unit that was free to operate under the new rules of engagement and free to compete with other business units of the existing parent company. For example, IBM was a mainframe manufacturer that was able to survive several waves of disruptive innovation by adopting this technique.

There is a lesson in this for Oxford. And we ask the Oxford dons directly, where is your online education business unit?

If it chooses to do so, Oxford still has time to compete with online upstarts like Coursera by creating an online education platform of its own. 

Since online education is an inferior product when compared with bricks-and-mortar education, it falls within Clay Christensen’s definition of a disruptive innovation. As such, Oxford would do well to heed Christensen’s advice by creating a new business unit which is free to compete even with the University itself.

From a branding perspective, we would also suggest that the platform be called something other than “Oxford” in order to preserve the brand of Oxford’s more premium bricks and mortar product.

Free Charities from The Idea of Charity

“We’ve put charities in a box for far too long, let’s set them free.”
~ Nat Ware, CEO of 180 Degrees Consulting

IN an informative and timely TED Talk, Nat Ware explains how society’s traditional notions of ‘charity’ often constrain the ability of charities to have a meaningful social impact.

Below we highlight three beliefs about charity that Nat argues are holding us back:

  1. Measuring social impact: we tend to assess a charity’s effectiveness in superficial ways. For example, we tend to measure a charity’s effectiveness based on whether it has low administration costs, ignoring the fact that higher administration costs may also mean much higher social impact. We also tend to assess a charity’s worth based on anecdotal evidence rather than objective data driven analysis. This is a problem since it means that we are probably misdirecting our charitable dollars and having less impact than we think.
  2. Operating for profit: we wrongly believe that a charity should never operate for profit.  This belief ignores the fact that organisations often need to generate profit so that they can attract investment to scale their operations and have a meaningful impact.
  3. Taking risks: we expect that charities will exist forever, however we don’t have the same unrealistic expectations about for-profit businesses. Nat explains that even the most successful business leaders (e.g. Steve Jobs, Bill Gates and Richard Branson) have experienced countless failures in the process of building remarkable and world leading businesses. By not allowing charities to fail, we are limiting the entrepreneurial innovation which is needed to solve many of the world’s biggest problems.

Business Mutualism

Business Mutualism

MUTUALISM, a concept from biology, refers to a relationship between two species or organisms in which both benefit from the association.

Following on from the ideas put forward in a recent talk by Robert Full, we can apply this idea to the world of business by considering the idea of “Business Mutualism”.

We might think of Business Mutualism as an association between two separate enterprises, or fields of activity, where:

  1. each enterprise benefits the other, and
  2. collective discoveries emerge beyond those of any single field.

Examples of Business Mutualism

One example of Business Mutualism would be the interaction between the IT and design industries. Information technology has provided designers with a new creative outlet, encouraged innovation through the use of design software and mass collaboration, and allowed designers to reach wider as well as more niche audiences. On the flip side, designers have improved the value of information technology and the internet by improving the aesthetics and usability of programs and websites. The combined efforts of these two industries have created world changing websites, such as TED.

Here are a number of other examples where collaboration between different fields of activity have produced impressive results:

  1. the formerly non-existent web-search industry and the traditional system of academic citation have combined to create Google;
  2. electronics and automotive industries have combined to make carbon neutral transportation a possibility;
  3. aviation and computing have combined to produce unmanned aircraft; and
  4. biology and robotics have combined to perfect walking robots.

Implications of Business Mutualism

One of the key implications of Business Mutualism is that we should look to other industries and fields of activity for inspiration. If we want to create market leading companies, we need to constantly innovate and search for alternatives. Keeping our eyes open to the possibilities presented by Business Mutualism is likely to help us sustain a competitive advantage over our rivals.

There are many good ideas already in existence. The question is, how can we combine these ideas with our current expertise to create something revolutionary? How can we change the world?