Jan 26, 2025 | Governance, Leadership, Personal Rant
John Maynard Keynes once said, “The difficulty lies not so much in developing new ideas as in escaping from old ones.”
On this Australia Day, it feels particularly apt as we continue to grapple ineffectively with deeply embedded issues that requires systemic adjustment. This sort of change is beyond the short-term populist sport that passes as leadership in this country.
The 26th January is just a date, but one that has become an institution for many. It does not mean the many injustices by current standards perpetrated on indigenous inhabitants should be forgotten or dismissed in any way. Perhaps by contrast we should be celebrating that most of those injustices have been acknowledged. Effort, ineffective as it may be if measured by the gaps in health, education, and opportunity of indigenous Australians, is being exercised to reverse the lingering effects.
They could also choose to see it as a day to celebrate what small amounts of indigenous culture remain, and see the day as an opportunity to inform others about what has been lost, the cost to us all of that loss, and the agonies of the frontier wars that so few of us, particularly my generation, know anything about.
Marketing 101: take a negative and find a way to turn it into a positive.
WooHoo, an election.
We all look forward to the coming tsunami of creative press releases making flimsy, transparently self-interested promises daily. They will inhabit our lives along with the high viz jackets, hardhats, and staged media events that bear no relation to reality until life returns to normal after the poll.
Our three-year cycle, combined with the election dates being in the hands of the government are too short. The first months of a new parliament are spent crowing and blaming, the next 12-18 months is spent back patting, and the last period moving towards an election ensures that nothing will get done. From now, speculation about poll dates, claims and counter claims about anything that can be boosted up to the level of trivial will crowd out anything resembling sensible policy debate, development and more importantly, implementation from now until the poll results are called.
The AI Revolution.
The rise of artificial intelligence is reshaping industries and redefining the future of work. Generative AI, while transformative, is prohibitively expensive to train. This will leave the development in the hands of a very small number of individuals creating an extremely powerful oligopoly. This will leave small businesses at a cost and capability disadvantage. Australian SMEs, the backbone of our economy, are struggling to implement even basic AI tools for back-office automation, and the pace will continue to accelerate. Many will go to the wall, some of them deservedly so, but many valuable enterprises will disappear simply because they do not have the wherewithal to invest in harnessing AI to compete effectively.
Yet, there is cause for optimism. AI is not about replacing jobs, although people using AI will replace those who do not. The number and type of jobs that emerge will outweigh the losses, as has happened every time in history when a transformative technology emerges. In the transformation will be many opportunities, if we are smart enough, and ready to grab them.
The challenge lies in avoiding overhyped claims. Social media is awash with “AI-powered” solutions that often offer little substance. The real opportunity lies in training workers and rethinking education systems to prepare Australians for an AI-enabled future. I look forward to seeing the policies to generate positive outcomes being unveiled, and more importantly, deployed after the election.
Housing: A long term ‘Crisis’
For decades, Australia has underinvested in public housing while urban migration has intensified, leading to skyrocketing rents and property prices. Young Australians find themselves trapped, unable to afford homes in cities like Sydney or Melbourne, while regional areas remain underdeveloped.
‘Crisis’ is the wrong word to describe 40 years of policy failure. It implies a short term phenomenon, when the drivers of the current situation are anything but short term. Those poor, short term policy choices across several domains of responsibility have cemented in a systemic housing shortfall that will only be addressed by painful in the short term but long term focussed remedies.
Sadly, in the coming election I expect housing to be a political football, abused and accused by all colours of politics.
Education: Cost or investment?
Our education system is at a tipping point. While private schools thrive with abundant resources, public schools are starved of funding. Stories of teachers buying basic supplies like pencils and paper for their classrooms are sadly common, something I know first hand. These disparities perpetuate inequality, leaving students in disadvantaged areas with fewer opportunities over their lifetime. This suppression of opportunity also supresses the vitality and competitiveness of economic activity, which affects us all.
We need to reimagine education as an investment, not a cost. Finland’s model, where public schools are well-funded and attract the best educators, proves that equity and quality are achievable. Equipping every child with access to air-conditioned classrooms, modern technology, extracurricular programs, and professional ‘cream of the crop’ teachers should not be a luxury but a baseline expectation.
Beyond infrastructure, we must value vocational education and practical skills. The loss of manufacturing jobs in Australia has eroded our trades base. The car industry, once a “university of engineering” for many Australians, is gone. If we want to build a nation ready for the future, we need to invest in apprenticeships, technical training, and industries like renewable energy component manufacturing, technically advanced machine tools, cutting edge pharmaceuticals, value added processing of Australia’s inventory of raw materials from bauxite, iron ore, rare earth minerals, and wool.
The economy is stretching, where is the limit?
Australia’s tax system is increasingly unbalanced, with a disproportionate reliance on PAYE taxpayers while wealthier individuals and corporations exploit legal loopholes to reduce their obligations. This creates a growing divide between those who contribute their fair share and those who shift profits to low-tax jurisdictions or benefit from capital gains and resource rents taxed at far lower rates. PAYE taxpayers bearing the brunt of funding essential public services which others dodge, must have an end point.
The consequences of this imbalance are stark. Social cohesion erodes as the gap between the “haves” and “have-nots” widens. Essential public services: education, healthcare, infrastructure, social services, all face increasing demands for their services, while resources are becoming increasingly scarce. The Henry Tax Review, released in 2010, highlighted these inequities and proposed reforms. All but a very few of its reasoned and economically sensible recommendations remain unimplemented.
Politicians across the parliament have been spooked by the modest efforts of the Shorten-led opposition’s push to close a few obvious loopholes, presented to the electorate in the 2019 election. Without substantial reform, which history proves must be bipartisan, the system risks imploding under the weight of its inequities. It is time to revisit comprehensive tax reform to ensure a fairer distribution of the burden and a more sustainable future.
Energy transformation.
Australia’s energy transition is both a challenge and an opportunity. Electrification is accelerating, with everything from transport to manufacturing shifting away from fossil fuels. This increased demand for power risks overwhelming our grid unless investments in renewable energy and storage are fast-tracked, and the dilemma of a dependable on/off base load power resolved.
The quality of debate about energy policy over the last 20 years would make schoolkids blush. The need for change has been obvious for years, but that need has been passed around like a parcel at a kids birthday party. Well, the music has stopped, and the parcel seems not to have a chair.
There are initiatives like community-owned solar farms and battery projects that show the way. Yackandandah in Victoria is one such example. The town has become a model for energy independence, aiming to generate 100% of its power from renewables. Projects like this are tiny experiments, out on the fringes, which is where most change starts. The complexity and cost of scaling from local initiatives to an economy wide electrification are huge, but the path is very clear, and the necessity absolute.
Geopolitics.
The world appears to be stumbling backwards, and at the same time becoming increasingly polarised between the old fashioned descriptors ‘left’ and ‘right’. These descriptors no longer apply. China has demonstrated an ability to generate, harness and deploy capital while building capabilities at an unprecedented pace, hallmarks of capitalism, unmatched by that icon of capitalism, the US. The re-ascension of Trump to the big house, and gathering kleptocracy that surrounds him triggers uncertainty, mistrust, and will result in an implosion of geopolitical trust and collaboration, already at a very low point. The wars in Europe, the Middle east, and the less publicised but no less savage civil war in Somalia, on top of tensions around the Taiwan straights are a poor starting point for a peaceful world. There are also a number of regional conflicts that barely raise a sweat globally, all of which could be a catalyst for wider conflict.
Our defence expenditure is increasing as the world becomes more unstable, all from the diminishing tax base, and we have harnessed ourselves to a potentially erratic US (at least for the next four years) and a lame duck UK by the arrangements of AUKUS. This is a huge ‘all or nothing’ bet on nuclear subs, which to me seems muddle headed at best. There are potentially significant technical and industrial benefits to be gained, but the cost is effectively unknown, the defence capability doubtful, and the time frame long. Usually I am a supporter of long term thinking and placing bets on the shape of the future, it just seems that the bet on AUKUS is a poor one.
Something will break, somewhere.
The environment.
The place we live is the glue that holds the rest of the forgoing together. We must figure out a way to protect and nourish it, while accommodating the accelerating demands coming from an increasing population.
We are in a crunch. The demand for electricity is increasing, and will continue to do so driven by the predicted geometric increases in consumption by digital systems. At the same time, we are winding down power sourced from fossil fuels. The loser, unless there is a dramatic change in direction, will be the natural environment. If that continues to be the case, our grandchildren and (for me at least) great grandchildren will be screwed.
The Path Forward
As a group, we Australians need to exercise the muscle between our ears.
Stop listening to the ‘news’ and accepting the nonsense presented as news as fact. Instead, be philosophical and examine the sources of that ‘news’ and consider the bias that will be inherent in it.
Treat the filter of ‘news’ by social media with the contempt it deserves. Social media is a great tool, which we have seen monetised by a small number of billionaires for their own purposes, by using our behavioural instincts in ways evolution did not foresee and has failed dramatically to adjust to.
Look for sources of the opposite of what is fed to you by ‘news’ publishers and the cesspool that is social media. Perhaps then you might get a better picture.
Whenever we build a ten foot wall to address some sort of problem, or shortcoming, the smart set, armed with lawyers, morality deprived publicists and urgers, turn up with an eleven foot ladder. There is nothing we can do but be vigilant and continue to repel the pirates wherever they appear. This takes leadership, resilience, and a sense of duty to the wider community that is sadly lacking currently. The pirates are swarming over the fences, and if the US is any measure, the supposed good guys are being deployed to remove bricks.
Keynes was right. Escaping old ideas is hard. However, if any country can rise to the occasion, it’s Australia.
Pop a beer and throw an extra snag on the barbie for me. Have a great Australia day and consider the calls for a change in date to be motivated by a desire to have the best possible outcomes for all Australians.
Jan 21, 2025 | Leadership, Strategy
‘Strategic thinking’ is that thing most managers claim to do. Often their effort amounts to little more than scheduling next year’s budget with a 5% increase across the board. It’s like preparing for a cross-country road trip by only checking your rearview mirror. Such a view does deliver information, which makes everyone feel better, but it is probably not what you really need to know to avoid the changes in the road.
Think of strategy like a game of stud poker. There are the cards in your hand (things you control), the cards on the table (things you can see but can’t control), and the cards yet to be dealt (the unknown unknowns that keep CEOs awake at night). Most of us spend our time obsessing over our hand while barely glancing at the table, let alone thinking about what might come next. It’s no wonder most strategic plans have the shelf life of a quarterly forecast derailed by something unexpected.
These are the three perspectives you need to integrate to build a resilient strategy that delivers superior outcomes:
- Your Hand (The Controllable): This is your comfort zone – budgets, teams, processes. Important? Sure. But if this is all you focus on, you’re playing solitaire in a poker tournament. For example, Netflix’s early strategy focused on perfecting its DVD rental logistics, then moved very early to streaming. Blockbuster completely missed the streaming wave by being wedded to what they had in their hand.
- The Table (forecastable but Uncontrollable): These are the market trends, competitor moves, and regulatory changes that everyone can see. It’s like looking out the window at the weather, you can’t control it, but you’d better pay attention, or miss out as did Blockbuster.
- The Unknown (The Wild Cards): This is where things get interesting. It’s the stuff nobody saw coming. The Covid pandemic, Hamas attacking Israel, and the ferocity of Israel’s response might qualify. Similarly, a competitors factory burning down, or the sudden emergence of TikTok. Tesla’s rise wasn’t just about electric cars; it was about reimagining the automobile industry in ways others hadn’t considered, and stealing a huge lead over incumbents as a result.
Roger Martin’s Secret Sauce
Roger Martin, is the strategy guru who makes other strategy gurus feel like they need to up their game. He developed a framework that’s surprisingly simple to say, but still deeply challenging to deploy well. He calls it “Playing to Win.” I sometimes refer to it as “Five Questions that might stop you shooting yourself in the foot.”
Here’s the deal:
- What’s your winning aspiration? For Patagonia, it’s protecting the planet while making quality gear. “Being the best” doesn’t count, as it does not enable anything. My eldest sons soccer team had that goal, but lacked the basic ingredient of talent.
- Where will you play? You cannot be everything to everyone, despite what your sales team may think. Targeting eco-conscious adventurers allowed Patagonia to dominate its niche.
- How will you win? This is where you need to get specific. “Excellent customer service” is not a strategy. Amazon redefined customer service with ‘free’ 24 hour shipping and no-questions-asked returns.
- What capabilities do you need? Be honest, not optimistic. Amazon’s logistics network didn’t appear overnight; it was built with significant and deliberate investment.
- What systems must be in place? The boring but crucial bit that makes everything else possible. Walmart’s supply chain system is a textbook example of operational efficiency.
Following are some tips from experience that should make deploying Martin’s framework a bit easier.
Channel your inner five-year-old
Remember your kids kept asking “why” until you questioned your life choices? That’s first principles thinking in action. Instead of accepting “that’s how we’ve always done it” (the corporate equivalent of “because I said so”), we need to channel that annoying but brilliant five-year-old curiosity.
Tesla didn’t just make better cars. Elon Musk saw the potential of an entirely new way of engineering personal transport. Ask yourself: “What would this look like if we started from scratch today?”
Customer centricity
Being customer-centric is like being a good listener at a party. Everyone claims to do it, few actually pull it off. Real customer centricity means developing almost psychic levels of customer understanding.
Apple anticipates user needs with seamless ecosystems, while Spotify curates personalised playlists that feel almost uncanny. It’s not just about asking customers what they want, but about understanding their lives so well you can see where they’re headed before they do. Amazon keep an empty chair in every meeting as a reminder that they must never forget the customer.
Scenario planning
Think of this as your business GPS, but one that shows possible future roads, not just the ones that exist today. There are plenty of mind-mapping and task recording tools around now that assist the thinking. Update it regularly, make the updating of the map a quarterly agenda item in your management meeting. In this way, you will almost certainly be more thoughtful about emerging opportunities and threats than your current opposition.
The assumption testing framework
This is where you play “strategic Jenga” carefully pulling out each assumption to see which ones are actually holding up your business model and which ones are just taking up space. Often the challenge is to identify the core assumptions, before they become so ingrained in the fabric of the enterprise that they can almost disappear. Start by listing the core assumptions about your market, and test one at a time by having conversations in key customer segments. These conversations will also serve to alert you to the stuff happening on the fringes that may evolve to disrupt current assumptions.
Synthetic market research
AI powered market research is an emerging tool that will rapidly alter the balance of power in many markets. Suddenly, you can get very accurate insights in a very short time, for a fraction of the cost of traditional market research. For smaller marketers have been excluded from extensive market research insights by cost and time. AI powered ‘synthetic’ research is like having a time machine enabling you to look forward and make those difficult strategic choices with more certainty than just yesterday. There is no certainty about the future, but the more and better insight you have, the better choices can be made.
Have a weak signal detection system
This is your business equivalent of those people who can smell rain coming before the clouds appear. Set up your organization to notice the little changes that normally occur on the fringes of every market, that might become mainstream.
- Subscribe to trend newsletters in adjacent industries.
- Conduct regular chats with customers (the kind where you actually listen).
- Build cross-functional collaborative teams who compare notes, ideas, trends they see, and insights.
- Forge partnerships with startups to stay ahead of disruption.
- Look for the small customers that the sales people describe as demanding and difficult. Sometimes that are the ones setting out to be different. Remember that every large customer started out as a prospect, and most probably a small and difficult customer.
Continuous strategic improvement.
When playing out on the edge, mistakes will happen. When they do the best companies and people learn from them, absorb the lessons, and go again. They build resilience and deep domain expertise from everything that happens to them. Continuous improvement is a mindset as valid in strategic thinking as it is in any other operational domain. Arguably it is the driver of CI across an enterprise, as the strategy plays a key role on the generation and nurturing of culture, a necessary context for CI to thrive.
Strategic thinking isn’t about having a crystal ball, although we are getting better at articulating the challenging strategic choices that abound. It’s about building an organization that can spot changes early, adapt quickly, and occasionally make bold moves that leave competitors wondering what just happened.
The trick is finding the right balance between the cards you can see and preparing for the ones you can’t. Use first principles thinking to challenge those comfortable assumptions, stay close enough to your customers to finish their sentences, and leverage new tools like synthetic research to stay ahead of the curve.
The goal is not to predict the future perfectly, it’s to be better prepared for it than the next guy. When you can do that, you can win the competitive race, and hopefully have a little fun along the way. After all, if you’re going to spend time thinking about strategy, you might as well enjoy the process.
Dec 23, 2024 | Change, Leadership
Yesterday was the summer solstice here down under. The longest day of the year. While it is a long slide into the modest chills of winter, it has begun, again.
It is also just two sleeps until my grandchildren can rip away the wrapping paper and play for a short time with their new stuff, mysteriously left by a bloke with a beard (and tatts?) before they get back to being endlessly curious about everything around them.
Wonderful thing having grandchildren. As American writer and commentator Paul Harvey said, ‘Nobody should have children, but everybody should have grandchildren”. I’m not too sure how that would work, but am fully on board.
What a year.
Our American allies voted in, again, a convicted felon as President. Nobody I know understands the dynamics of this choice, we just hope it works out better than we think it will.
World economies are struggling, and while Australia’s economy is in a per capita recession, and we have all sorts of challenges, the government seems to be delivering the promised ‘soft landing’. However, if you are renting in Sydney or Melbourne, you probably do not see anything soft about it. It also seems to me they have squibbed on several important (to some) questions. Gambling advertising will continue, we do not have any transparency on political donations, the federal ICAC has been shown to have no teeth, no regulatory progress on promised measures to mitigate carbon emissions, and housing affordability. That last one will hurt the government, as they will carry the blame for 40 years of underinvestment, and tax breaks given by both sides of politics to buy votes, which has led to the current ‘crisis’.
Investment in infrastructure generally has been lacking for years, but 2024 saw a surge in big ticket items like roads and suburban rail, showing massive cost blowouts. Snowy 2 point whatever is good in theory, and perhaps history will be kinder than me, but what a cock-up! Add AUKUS and a few others and you have the seeds to common disbelief in the ability of public bodies to get out of their own way.
Private investment in productive assets is also lacking, reflecting both a lack of long-term confidence, the incentives favouring non-productive assets, and the lack of depth in our own company’s ability to compete on the world stage. Beyond digging stuff up and shipping it off for value adding elsewhere, we are diminishing as a viable competitor in the world economy. This is a structural failure over a very long period. Donald Horne observed in 1964 that we were the ‘lucky country’. Most misunderstood the sarcasm of the statement at the time, and still do. However, we continue to sail along as if there was nothing to be fixed.
Our politics is stressed, superficial, divisive, and utterly short term, and over the first few months of 2025, will only become more so as the election approaches.
ChatGPT, launched into the wild on November 30, 2022 has led to a frenzy of innovation that will be seen by history as being as momentous as the printing press, and electricity. When I first stumbled across it in mid-December 2022, I thought it was astonishing but had little idea of the impact over the following months, and now two years. The initial thought was ‘will it take my job? I have concluded that AI will not take peoples jobs, although every job will change, and some disappear being replaced by ones we have not thought of yet. However, people who use AI will take the jobs of those who do not. No use hiding, the world has changed, again.
2024 also saw increased ferocity in the Ukraine and Gaza. Many have noted that War is the logical result of the failure of diplomacy. In both these current cases, you could add massive ego and fanaticism to the failure of diplomacy over centuries. From the comfort of a Sydney home, it seems a long way away, until a synagogue in Melbourne is torched, and there are riots in Sydney.
This is my last post for 2024.
I will sit back and wait for Santa, have a drink, see if the Boxing Day test has given us an opener who can withstand the wiles of Bumrah, and contemplate my expanding naval until early in 2025. Thanks to those few regular readers, I hope I have added to your menu of possibilities over the year.
Unlike many, every word I write is mine. Nothing artificial, inorganic or transcribed from elsewhere, although from time to time, I have asked for help in writing a headline that grabs attention. The tsunami of so called content spewing out of the AI tools makes the fight for attention more aggressive, vicious and destructive than ever.
Hug your kids, love your partner, value your friends, and stay safe and well.
Merry Christmas, and I will ‘see’ you next year.
Nov 18, 2024 | Governance, Innovation, Leadership, Strategy
The latest economic complexity rankings put out by Harvard were recently released. Australia dropped from 93 in the world to 102. One place ahead of Yemen, one behind that manufacturing innovator, Senegal.
I had missed the report until an article in the auManufacturing LinkedIn group brought it to my attention.
The best that can be said about Australia’s drop from 93 in the previous ranking to 102 in this current ranking is that we have made possible the performance of the 101 countries that are above us.
This includes such stunners as Bangladesh at 100, Honduras at 97, Uganda at 96, and the home of Voodoo, ranking as one of the world’s poorest countries, Benin at 99.
To be fair, the ranking methodology struggles to adequately quantify the benefits accrued by services in its calculations. This compromises the ranking of Australia which has an advanced but hard to count services sector, while exporting mostly commodities, which is easy to count.
Nevertheless, while politicians are ensuring the public debate (aka playground squabbles) is around irrelevancies like the chairman’s lounge, long term challenges in education, aged care, housing, equality of opportunity, and economy wide productivity go uncontested.
Take education for instance.
This is a very substantial sector generating billions in economic activity by educating the children of our Asian neighbours. Many see it as a road to residence, which will benefit our economy doubly, as they have paid for their own education. However, many return home, enabling the ‘connections’ highlighted in the report as critical to complexity to be made. Meanwhile, for our own kids, we have continued to make getting an education more expensive to the point where it is becoming unaffordable in the absence of parental support.
In our wisdom, we are in the process of ringbarking this pathway to complexity.
How stupid can we be?
I recall in 1980 then Singapore PM Lee Kuan Yew warning that Australia was destined to become the ‘White trash of Asia’. It seems his warning is coming to pass.
PS. November 22. This ‘Visual Capitalist’ graph of the 30 largest exporters came into my feed today, adding some flesh to the bones of the index. The make-up of exports of several of them should lead to some deep thought. For example, Holland, Switzerland, Belgium, even the battered UK, where there are no hydrocarbons or minerals in the mix, outrank our commodity driven export mix. This is a solid indicator of the ‘complexity’ to which we should be building.
