The Year Ahead

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It looks like it is going to be a big year.

This year I will be back at University Of Wollongong teaching in the Arts Faculty – the same subject as last semester, ARTS301. I had tremendous feedback last semester from students. The subject is really about helping those about to graduate to understand how to create the optimum onramp into business.

I am also going to teach a strategic management course at the AIIM in Sydney, which should be interesting. And, while on the academic side of things, I also have some funding approved to undertake a research project¬† that will examine the value that businesses place on Science and Engineering PhD students and which will enable direct engagements to take place between students and high tech businesses. I will be writing about this over the coming weeks. I hope that some of the material gleaned will become part of a forthcoming book. The goal of the research is multi-functional. Hopefully it will enable PhD students to build a greater appreciation of the need to build an understanding of what industry wants, it should also grow the network of end-users for UOW, and it will hopefully also yield some useful insights into the vision of industry in this country…. (and much, much more!)

I also have several corporate advisory opportunities lined up in conjunction with a firm in Sydney. These are focused in the online retail sector, and life sciences at this point in time. I am also hopeful that the hydrogen production technology business that is being spun out at UOW and which I wrote the business plan for, will provide some further interesting opportunities.

Whenever I look at a sector of industry these days I find that there is a lot of legacy thinking present that doesn’t fully appreciate the way that either the digital economy or globalization are impacting them. This, in spite of the fact that some very bright people have been hired to work for some of the major corporates that are affected.

I see certain parts of retail as the sector that is changing rapidly and moving toward tipping points in a number of places. The Australian retail sector is already in stress as it is impacted by online sales.The entry of Oliver Samwer and Rocket into online retail in Australia toward the end of 2011 with a focus on disrupting some of the existing online retail operators shows just how vigorous the competition is going to get. By their own admission he is a take no prisoners kind of guy. (See this story on him for an insight)

The irony is that the retailers who whinge the loudest about online think that they are having the lunch eaten by importers. The fact of the matter is that there are some products that are being shipped into the county at low prices, but the competition between local online retailers is equally fierce. What happens is the creation of a very well defined, but not overtly visible, two tier retail economy. The tiers of activity are ironically substantially defined by the discretionary income of the consumers. Those who have the least available cash purchase goods at retailers where credit is easiest and consequently pay the highest prices. Those who have the greatest discretionary income purchase at the cheapest price. This bifurcation of the  market is going to influence advertising on mainstream media, which in turn is going to influence content purchase.

The value shoppers have the greatest capacity to continue to spend, while the high margin shoppers, are actually customers for high risk lenders with retailers acting fundamentally as re-sellers of credit. As a result we can expect the standard of content to become even more of a race to the bottom, to provide entertainment that can be built around ads for Harvey Norman and businesses that cater to the demographic that accepts paying high prices for goods! Ironically this should result in higher A+ viewers for SBS and the ABC, since the Foxtel franchise tends to recycle the same programming again and again, and notwithstanding its purchase of Austar is going to find that it is caught between the cleft stick of subscriber churn and increased costs of purchase of programming from the major studios.

At the physical end of retail this leads us to a point where the high priced shopping complexes which are reliant on foot traffic from high value customers will have decreasing foot traffic since their demographic will shop more from home to find competitive prices, not have to deal with traffic, and is not interested in the homogenized offerings of the major chains.

What that means is that the major shopping centres and their investors are going to start to feel the pinch. They will find that some of their smaller retailers just can’t compete. These are the retailers that don’t have the depth of financial resilience, nor the motivation to compete aggressively online. If these retailers don’t move online they will go under. When these businesses find that the foot traffic at the big mall is not converting into sales, they will quit. When that happens the rot will set in. The big retailers can find a solution, but the probability is that they will only look at the disruption from technology, and not look at a host of other things that are all part of what is very clearly a “wicked problem”.

Solving wicked problems is going to be part of the goal for this year.

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