Last week I was honoured to be asked to give the keynote speech at an event that marked the graduation of the first batch of companies to complete the globally-recognised Founders Institute program in Sydney. You can read more about that program elsewhere, but I thought it might be worth sharing the content of my presentation with this forum.
The first message was that there has never been a better time to start a business – particularly a services-type business, especially if you are starting it online. For starters, thanks to the technologies of open source and cloud computing and the global outsourcing industry, it costs little to start a company compared to what it did years ago. We have refined this process into what Eric Ries has defined as the Lean Startup, which is represented in the concepts of ‘failing fast’ and the ‘minimum viable product’. To this effect, you can now get a services company up and running – and potentially profitable – in just months, and for just thousands of dollars.
Secondly, there is also a far wider range of technologies to work with, including 3D printing, machine-to-machine communication (also known as the Internet of Things), augmented reality, artificial intelligence and so many more. Most of these are available at little cost today.
And thirdly, the opportunity is so much greater now. The Internet has torn down the barriers of geography, and if we look beyond the English speaking world we find markets such as Indonesia, with 200 million mobile subscribers and 55 million Internet users (ahead of South Korea with 40.3 million) and set to double over three years (according to Boston Consulting Group (thanks to Shinta Dhanuwardoyo and her presentation at X Media Lab in Sydney a couple of months back for the inspiration and stats). Certainly there are huge opportunities for globally-oriented services businesses.
But when thinking about the future of our services sector, it is worth doing so with a sense of urgency.
Firstly, starting companies is not culturally specific. The same tools that enable Australians to start a business cheaply are available to anyone anywhere in the world. It is likely that the computer programmer in the Philippines doing work for an Australian employer one day dreams of being the employer themselves. Entrepreneurship is also not culturally-specific, and we are seeing a wave of Asian-born globally-oriented start-ups, particularly coming out of India. And that market alone produces roughly 750,000 engineering graduates each year. That is a massive amount of potential for the Next Big Thing. That means there will be a lot more companies out there competing in the global services industry.
The other factor that we need to contend with is that the same economics that have decimated Australia’s manufacturing sector are set to play out across other industries. Shifting market dynamics driven by low-cost offshoring options and revamped logistics chains will see the repricing of a wide range of services – we’ve seen it with software development, it is now happening with design and secretarial services. These trends will also further erode the sustainability of even bricks-and-mortar industries such as retail.
The upshot is that the job losses seen in manufacturing will be insignificant compared to what we could see should large segments of our service industry shift into lower-cost markets. IBM’s A Snapshot of Australia’s Digital Future to 2050 report has already predicted the demise of 15 industries including, Free-to-Air Television Broadcasting, Newspaper Publishing and Motion Picture Exhibition. And they are just the obvious ones. Respected US futurist and author Dr Thomas Frey (who is speaking at the forthcoming Creative Innovation 2012 conference in Melbourne) has also predicted 2 billion jobs will disappear by 2030. The upshot is the possible hollowing out of Australia’s middle class.
We need to start replacing those jobs today – a task made all the more difficult by the skills of many of those displaced workers being unsuited to the needs of entrepreneurial start-ups.
Australia faces a crisis, and it is one that I suspect few people have considered. If we are to succeed as a services-based economy over the next 20 years we need to start investing today in building up both the capacity of our workforce to adapt to that future, while giving encouragement to the entrepreneurs who will create it.
We need to invest in vibrant new businesses, to create employment and redistribute wealth and enable subsequent investment in round after round of new ventures. And we need to infuse technological capability and entrepreneurial concepts into existing businesses to enable them to innovate and expand.
We need this to be happening here, we need this to be happening now. Because if we don’t make it happen, someone somewhere else will. And who wants to tell their children to prepare for a lower standard of living?
