Business First Magazine - March/April 2017 by Associated Media Group Pty Ltd

BUSINESSFIRST for Business Leaders

March/April 2017

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HOW PRIME FINANCIAL DELIVERED ON ITS PROMISE Why agglomeration is the business model of the future

GREG COMBET AM Why the defence industry is a pillar of the economy

Business in South Australia

Could SA be the innovation capital of the country?

LexisNexis

Business requires the Rule of Law

CBRE

The value of commercial real estate

ECOMMERCE FINANCE HEALTH LEADERSHIP MARKETING and more

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CONTENTS REGULARS 4 Editor’s Desk 5 News 101 The Leader’s Bookshelf

47 Emotional Intelligence: The Emerging Key to Driving More Effective Sales Results

8 Corporate marketing trends for 2017

15 Influencer Marketing Predictions for 2017

48 Digital Business: Business need to cop the bad with the good By Robert Tolliday

PEER TO PEER

83 New Year, New Business; Are you ready? by Roger Mendelson 86 Are skills in execution of a strategy essential to succeed as a CEO? by Ryan Makris

LIFESTYLE

34 Why Contractors are your biggest tax risk By Murray Howlett

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91 The misalignment in technology and innovation By Bill Binch 94 Building an eCommerce site that drives loyalty By Chris Stolke

32 Wealth Transfer – even before death by Genene Wilson

40 Five performance standards that could be hurting your business by by Marc Gordon

53 Agglomeration: a collaborative approach to empower Australia’s entrepreneurs By Callum Laing 77 Generation Next: How the modern workplace can keep millennials happy, productive and content By Stuart Craig

SPECIAL FEATURE – INVESTMENT PART 2 16 Investment & Economic Review January 2017 20 Responsible Investment: from niche to mainstream force in finance 22 Tough times ahead for Australian and US stock markets 24 Tech stocks to watch on the ASX in 2017 26 Will the precious bull market continue

Prime’s Three Pillars put Clients in a Better Place Simon Madder, Managing Director of the Prime Financial Group had created joint venture partnerships with 35 accounting firms around the country to create a unique financial offering.

42 Should we forget the New Year’s resolution? By Giam Swiegers

FEATURES – BUSINESS IN 2017

10 How to Get the Best Out of Technology in 2017 12 Could interest rates rebound in 2017

COVER STORY

98 Destination - Dip your toe in Fijian luxury

104

102 Health - Tips to boost your immune system 104 Fast Lane - The Lexus LC: A Dynamic Luxury Coupe www.businessfirstmagazine.com.au

BUSINESS FIRST LOUNGE 36 A culture of innovation Shaun McCarthy has a very clear view about what makes a successful organisation. They are the ones with a strong culture. 44 The sum of all parts With more than 400 makes and models of cars in Australia, the aftermarket accessories, parts and service sector is serious business and Bapcor owns the space. 50 In defence of Australian business Greg Combet has been tasked with advocating for defence nationally and internationally, bringing in investment, as well as helping to build the brand. 54 South Australia - A State of Reinvention Business First talks to with businesses, learning institutions and government bodies that are bringing innovation, collaboration, entrepreneurship and international relevance to the State. 70 Innovation in law, the process of disruption Holman Webb chief executive officer Greg Malakou says innovation gives his law firm a competitive advantage. It’s the firm’s growth strategy.

78 Shaping justice, how LexisNexis uses the rule of law The rule of law is not only critical to the effective running of society, but it also plays an essential role in organisational practice and ultimately business success. 80 Keeping ahead of the game Melissa Hamilton has taken Stellar, the business process outsourcing and contact centre operator in bold new directions. 84 The commercial service model CBRE, the world’s largest commercial real estate services and investment firm, has seen exceptional growth both globally and through its Australian division. 88 LIW: Busting the leadership myths They say leaders are born, not made, however sometimes they rise like a phoenix from the ashes to draw on life’s experiences and have substantial real world influence and impact. LIW (Leading Initiatives Worldwide) CEO Pia Lee, fits neatly into this category.

92 The business of risk Every business in every industry faces risk which, in turn, can lead to crisis and emergency management. That’s where Tigertail can help. 96 Using technology to sell more and service better in 2017 Miller Heiman’s Martin Sparkes looks at how businesses can leverage new technology.

72 Gallop Solutions How one company is solving the business problems of today for a better future tomorrow. 74 Bringing innovation to the business landscape Brian Ruddle spent 14 years doing international development work and now has a keen eye for innovation.

84 www.businessfirstmagazine.com.au

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BF | EDITOR’S DESK

Collaboration & innovation Welcome to 2017. We hope you had a good break, have started the year refreshed and are ready to put the foot on the accelerator and speed into this year and beyond. We are starting the year with an important theme: collaboration and co-operation. Two men in this issue brought the importance of this theme home to us through the course of our interviews. Former federal Defence minister under the Rudd government, Greg Combet is a big advocate for co-operation. Indeed it is a key facet of his current role as Advocate for the Defence industry for the Victorian State government. While many of us only equate defence to military operations, this industry is, in fact, one of the most important contributors to the economy. In Victoria, the defence industry contributes $8 billion to the State’s coffers, with over 300 businesses directly employing over 7000 people who make equipment and provide services for defence activities. At a national level, the Australian defence sector employs around 25,000 people, with global defence companies accounting for approximately 50 percent of employment in the industry. It is a significant number and brings home just how important the defence industry is to the country’s smooth operation, however the industry would be nothing without co-operation between State and Federal governments, contractors, multi-nationals, SMEs and research facilities. As much as Mr Combet advocates the benefits of the industry, he can’t speak highly enough of the importance of collaboration. Tonsley Innovation District Precinct Director Philipp Dautel mirrors this sentiment. Tonsley is a world-class Innovation District where entrepreneurs, researchers and business large and small, co-locate to drive productivity, innovation and global competitiveness. “Tonsley’s success as an innovation district derives from the quality of the relationships between its partners and its unique design promoting an inclusive destination and allowing for Industry-research and business to business collaborations.” This message of co-operation is a very similar message to Mr Combet and an important one, which many of the businesses featured in this issue practice. Tonsley is a small part of a larger look at South Australian business in this issue, but we have packed it with some of the best business brains in the country as well. Shaun McCarthy of Human Synergistics talks about cultural innovation. Professor Phyllis Tharenou of Flinders University speaks about the culture of change. Melissa Hamilton of Stellar talks about creating partnerships that derive win-win outcomes. LexisNexis Managing Director Joanne Beckett gives us a lesson in the rule of law. Playford Mayor Glenn Docherty let’s us in on how to build strong communities. Brian Ruddle has years of experience in innovation, as does Greg Malakou. Simon Madder provides financial insight. Marie Wilson of UniSA looks at entrepreneurialism in the tertiary system. Rick Stone gives us the lowdown on risk, crisis and emergency management. CBRE Managing Director, Amanda Steele talks property. Bapcor’s Darryl Abotomey provides insight into the automobile aftermarket and finally LIW CEO Pia Lee busts leadership myths. That’s a big read in itself, but we also look at what trends to look for in 2017, as well as indicate the tech stocks to watch, why you should go to Fiji and drive a Lexus and finally the reasons you need to stay healthy this year. So let’s kick off the year with a bang and get back into Business First.

Jonathan Jackson

Jonathan Jackson Editor, Business First Magazine

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www.businessfirstmagazine.com.au PUBLISHER Alan Hyman EDITOR Jonathan Jackson SUB-EDITOR Judy Hyman MEDIA & Jake O’Donnell COMMUNICATION Gavin McCullough WRITER Leon Gettler DESIGN Gino Hawkins PRODUCTION Danise Li Head Office Level 1, 33-35 Atchison St St Leonards NSW 2065 Advertising enquiries Phone: 02 8416 5294 Email: bfadvertising@amgroup.net.au Subscription enquiries Phone: 02 8416 5294 Email: bfsubscriptions@amgroup.net.au Contributors Helen Arhens, Bill Binch, Stuart Craig, Alex Dunnin, Jo Formosa, Marc Gordon, Victoria Hamilton, Murray Howlett, David Hunt, Ryan Makris, Roger Mendelson, Alex Moffat, Simon O’Connor, Chris Stolke, Giam Swiegers, Rob Tolliday, Mark Verboot, Genene Wilson, Gabriel Yi Associated Media Group Pty Ltd ABN 68 123 058 926 Copyright ©2017 Associated Media Group amgroup.net.au DISCLAIMER Readers are advised that Business First Magazine and Associated Media Group (AMG) cannot be held responsible for the accuracy of statements made in the advertising. Opinions expressed throughout the publication are the contributors own and do not necessarily reflect views or policy of Business First Magazine or AMG. While every reasonable effort has been taken to ensure the accuracy of the information contained in this publication, AMG takes no responsibility for those relying on the information. AMG and Business First Magazine disclaim all responsibility for any loss or damage suffered by readers of third parties in connection with the information contained in this publication. WARRANTY AND INDEMNITY Advertisers and/or advertising agencies upon and by lodging material with AMG for publication or authorizing or approving of the publication of any material indemnify Business First Magazine and AMG, its servants and agents against all liability claims or proceedings whatsoever arising from the publication and without limiting the generality of the foregoing to indemnify each of them in relation to defamation, slander of title, breach of copyright, infringement of trademark or names of publication titles, unfair competition or trade practices, royalties or violation of rights or privacy regulations and that its publication will not give rise to any rights against or liabilities against AMG, its servants or agents and in particular, that nothing therein is capable of being misleading or deception or otherwise in breach of Part V of the Trade Practices Act 1974.

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NEWS | BF

First pension payments under new assets test due Older Australians will understand what the Government’s pension changes actually mean for them, with the first payments under the new assets test due from this week. These payments will cover the period from 31 December 2016 to 13 January 2017. On January 1, the Age Pension assets test limit dropped to $542,500 (from $793,750) for singles, and $816,000 (from approximately $1.1 million) for couples; and the taper rate doubled to $3 per $1000 a fortnight. Around 325,000, mostly low to mid-

dle-income people, are immediately worse off. Industry Super Australia modelling predicts that in ten years 50 per cent of new retirees will be adversely affected. Industry Super public affairs manager, Sarah Saunders, said: “The policy assumes that retirees can earn 7.8 per cent on the top portion of their savings. This is unrealistic in a low interest environment”. “If someone with modest savings on the assets test threshold ends up living off less than the full Age Pension, there

is no incentive to save,” she said. “Faced with sudden changes to retirement income policy, Australians working to long-established plans can be forgiven for feeling under attack”. “Older Australians who, later in the year, find themselves struggling as a result of the changes must let their families, local MPs or community organisations know,” she said. In 2015, several highly-regarded groups, while not opposed to some level of cut, suggested a compromise taper rate of $2 per $1000 per fortnight. BFM

metres to the north-east of Docklands, it would land in a suburb where the story is quite different. Here, rental vacancies spend the majority of their time at undersupply levels, with the maximum of 4 per cent reached just once in the last decade and returning to undersupply in a matter of months. This area has transformed substantially and continues to do so through urban renewal, assisted by passionate property developers/architects changing the street facade and prompting inner-city types to take residence in the area.

Is the Melbourne apartment market reaching saturation point? If you believe what you read in the media, Melbourne is currently suffering from an apartment glut. For those who dived into this market either as an investor or owner occupier concerns over significant price reductions are palpable. “We see it all the time, property investors scared off from a particular market because of a damning article highlighting the statistics of why not to invest in a particular city,” said Luke Graham a specialist researcher for both SMSF and individual investors. So how much truth is there to these statements? The common wisdom is that Melbourne is in oversupply of apartments, some even suggesting it could lead to significant price reductions, hurting investors and owner occupiers in areas throughout the city. www.businessfirstmagazine.com.au

There are a number of ways to measure the level of supply, some more effective than others. These include measurements of development applications, property sales volumes, price growth, construction commencements and actual construction. For our tale of two suburbs, let’s take a look at rental vacancies. DOCKLANDS Rental vacancies exceed 10 per cent three times in the last half-decade, with the running average of the last ten years well into oversupply. The area’s sales and sales growth has not been assisted by significant foreign investment and questionable architecture being some of many factors limiting local appeal. COLLINGWOOD If a crow (or magpie) were to fly 3.5 kilo-

CONCLUSION It is foolhardy to tar an entire city with the same brush which has happened all too much for in past years. It is clear that there are some areas of Melbourne that have seen development focused on revenue rather than sustainable design. These areas have had a damning response from the local demographic. Although minimising costs may seem like an intelligent business decision in the short term, the implications on the ability to match a modern demographic to these dwellings are dire in the long term. The old idiom of ‘build it and they will come’ is proven to be trivial in the urban environment of this decade. Just as in other industries, consumers demand more which is why there are winners and losers in the sub-markets of our capital cities. For today’s investor, an important principle to maintain is that you can save cents on poorly thought-out property today but it will cost you dollars when it comes to finding tenants and purchasers in the world of tomorrow. BFM

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BFM | NEWS

RENEWABLE ENERGY WINNERS

Nine pioneers in renewable energy and sustainability across five categories became the latest awardees to join the prize’s growing international community of winners. The 2017 recipients of the prize span a wide range of industry expertise, from breakthrough photovoltaic manufacturing to government policy advisory. The Zayed Future Energy Prize has so far recognised 57 individuals and organisations since it was founded in 2008. Li Junfeng, Director General of China’s National Center of Climate Strategy Research, won the Lifetime Achievement award for his unwavering commitment to the adoption of renewable energy in China. General Electric (GE) won the Large Corporation award for leadership in the wind and solar energy markets. GE’s wind business alone has commissioned 41.3 GW of total generating capacity

and installed more than 30,000 wind turbines to date. Sonnen, the German smart home and commercial energy storage system manufacturer, was awarded the prize in the Small and Medium Enterprise (SME) category for leadership in providing battery storage technology solutions. In the Non-Profit Organisation (NPO) category, UK-based Practical Action was recognised for its work in providing deprived communities with clean energy in Africa, Asia and Latin America. Joining them were the winners in the Global High Schools category, five schools spanning five regions of the globe. The five winners in the Global High Schools category are: Starehe Girls’ Center, Kenya for the Africa region; Green School Bali, Indonesia for the Asia region; Bolivia’s Unidad Educativa Sagrado Corazón 4 for the Americas; Belvedere College in Ireland for Europe;

and Huonville High School, Tasmania for the Oceania region. Now in its ninth cycle, the Zayed Future Energy Prize has positively impacted more than 289 million people through its international community of winners. This includes providing over 25 million people in Africa and Asia with access to modern, clean energy, off-setting over 1 billion tons of carbon emissions, and ensuring 17 million children of school age can study at night using innovative solar-powered utilities. His Excellency Ólafur Ragnar Grímsson, Former President of the Republic of Iceland and Chair of the Zayed Future Energy Prize Jury, said: “Through the sustainable actions of its winners, the Zayed Future Energy Prize is a model example for how far the world has come in the last nine years. It is extraordinary that, through the impact of each winner and the lives they continue to improve, we now see a growing strength in being able to deliver a sustainable future.” His Excellency Dr. Sultan Ahmed Al Jaber, UAE Minister of State, said: “The Zayed Future Energy Prize continues to honour the legacy of sustainability advocated by the UAE’s late founding father Sheikh Zayed bin Sultan Al Nahyan. With each awards ceremony, the UAE leadership accelerates the pursuit of innovation, reinforces the significance of sustainability at the top of the global agenda, and gives opportunities and far-reaching benefits to communities around the world.” BFM

Australian business confidence surges to highest level in 6 ½ years Small and medium business (SMB) confidence is now sitting at its highest level since March 2010, following an eight point rise to +46 on a net basis, according to the latest Sensis Business Index (SBI) survey. Sensis Chief Executive Officer, John Allan said: “Businesses closed out 2016 on a high, with confidence up seven points for the year and expectations that 2017 will be even stronger. While business owners again felt optimistic about their own specific business strengths, it was the improvement in the perceptions of the economy which really drove confidence higher this quarter.” The Index, which reflects the views of 1,000 small and medium businesses from across Australia, revealed that more than four times as many SMBs (61%) are now feeling confident, as

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those who are worried (15%). There were confidence gains everywhere except for Tasmania – down 14 points to +38. NSW is again the most confident location on +54, while the Northern Territory is again on the bottom, despite a seven point rise to +16. “The national improvement in confidence was primarily driven by businesses in the east coast states. The story in Western Australia and the Northern Territory was very different with businesses there still adjusting to the conditions in the resource sector, although the situation has improved somewhat this quarter,” said Mr Allan. Perceptions of the current state of the economy have moved into positive territory, jumping 11 points to +3, which is the best result since December 2013. “Just as the stock markets shrugged

off global uncertainty to finish 2016 on a high, it was also the case for Australia’s small and medium businesses. Perceptions of the economy are now in positive territory for both the short and long term projections and this points to a strong year ahead,” said Mr Allan. The Federal Government’s approval rating did not move this quarter, remaining on +2, although it finished the year down five points compared to the same period in 2015. “The number of businesses worried about excessive bureaucracy and red tape was up this survey and these are the key issues the Government needs to address if it is to win over more business owners this year,” said Mr Allan. Small and medium businesses comprise 99 percent of all businesses operating in Australia. BFM www.businessfirstmagazine.com.au

NEWS | BFM

GSK invests to support female technology entrepreneurs GSK Australia announced today that it will support BlueChilli’s ‘SheStarts’ – a national accelerator program and campaign to turbocharge female leadership in the startup economy. SheStarts presents a huge opportunity for female entrepreneurs offering ten women $100k each in preseed capital and a spot in the SheStarts accelerator to help make their startup ideas a reality. GSK General Manager, Pharmaceuticals, Anne Belcher said: “Digital technology is changing the face of healthcare at a rapid rate. We are seeing the introduction of electronic health records, wearable technology is making us more conscious of our exercise levels and changing the way we communicate with each other. It is important that men and women contribute to this change equally to ensure we generate the greatest benefits for society.” GSK is committed to driving digital innovation in the healthcare sector, not just through R&D but also by developing new business ideas and processes. Partnering with BlueChilli ‘SheStarts’ will bring this commitment to life and facilitate even more innovative thinking. GSK Consumer Healthcare General Manager, Elizabeth Reynolds said: “This partnership reflects our focus on digital innovation. It’s a great opportunity to share knowledge between sectors and build capabilities. We look forward to working with the finalists during the accelerator process.” SheStarts Director, BlueChilli Head of Diversity and Impact Nicola Hazell, said the program aims to change the face of the startup economy. “Women make up more than 50 per cent of our population. Yet in the startup ecosystem - where the most innovative, high potential businesses of the future are being created - women remain grossly under-represented,” Ms Hazell said. “In Australia, reports indicate women represent between 14 per cent and 24 per cent of startup founders, and when you look at those attracting investment, the stats are as low as 4 per cent. While the data may be somewhat patchy, the message is consistent - women are missing out. “In order to drive the economic results Australia wants and harness the value of diverse startup teams, we need to boost female leadership and back the www.businessfirstmagazine.com.au

ideas of women entrepreneurs with the funding and tech support to get them off the ground.” A national talent search was conducted to find the best ideas from women across the country, to solve major global challenges and tap into disruptive market opportunities. The top 20 ideas have now been selected to take part in a rapid validation bootcamp kicking off in Sydney this week, as the founders prepare to pitch for a spot in the SheStarts program. A documentary web-series will kick off in January 2017 and capture the founders’ journeys, as part of a multi-media campaign to inspire women and girls across the country to consider a future in tech and entrepreneurship. It will follow the startup founders from selection and initial bootcamp, through to the high stakes pitch event and into the SheStarts accelerator as they build and grow their businesses. The series will go behind the curtains to show the realities of the challenges female entrepreneurs face, touching on major issues such as gendered expectations for caring responsibilities, unconscious bias, conscious bias and the gender gap in financial security and investment. At the end of the accelerator program, the women will travel to Silicon Valley to learn about the US investment market and build new relationships, before returning to Australia to share their stories in communities across the country. “SheStarts is the start of something big - a massive collaborative effort to address the gender gap, by championing the role of women in tech, in leadership and in business,” Ms Hazell said. “We’ve been inspired by the enthusiasm of all the key players across the corporate and startup sectors, coming together to make this huge collective impact. By working together, we can move the needle and light a path for women and girls to join the startup economy.” Follow their journey at www.shestarts.com.au. BFM

China Consumer Prices Forecast Inflation, While Producer Results Show Brighter Prospects Independent data from the Cheung Kong Graduate School of Business (CKGSB) in Beijing shows mixed results just hours before official Chinese release. Inflationary pressure could increase later this year, but light is at the end of the tunnel for heavy industry prices in China. That’s according to new data out today from China’s leading business school, CKGSB. The CKGSB Business Conditions Index (BCI), which surveys executives at leading Chinese companies and asks them to forecast business conditions over the next six months, registered 61.4 in December (up from 60.8 in November, showing that for CKGSB’s sample of relatively successful businesses, optimism about future prospects is continuing to grow. Meanwhile, the consumer prices index rose in December, from 61.1 to 64.9, while the producer prices index broke through the threshold of 50, registering 52.4. China’s National Bureau of Statistics is due to release its monthly report on the Consumer Price Index (CPI), as well as the Producer Prices for the industrial sector, later on Tuesday January 10. Commenting on the results, CKGSB Professor of Economics Li Wei said, “The accepted view is that inflationary pressure will be minimal this year, but our consumer prices data shows that expectations of inflation ahead are taking shape. Meanwhile, an important shift has taken place this month, with the producer prices data finally rising above the confidence threshold of 50. The last time the index registered such positive prospects was in October 2014. This is in keeping with brighter prospects for heavy industry prices.” The CKGSB BCI comprises four sub-indices for corporate sales, corporate profits, corporate financing environment and inventory levels, all measuring future prospects except for the financing environment, which measures the current situation. Launched in June 2011 under the direction of CKGSB Economics Professor Li Wei, the CKGSB Case Center and the Center for Economic Research initiated a project to gauge the business sentiment of executives - the majority of whom are current or former students at CKGSB about the macro-economic environment in China. BFM

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BFM |MARKETING: 2017

Corporate marketing trends for 2017 If 2016 was the year Chief Marketing Officers and marketing teams got their tech stacks bedded down, 2017 is the year to get your data sorted, says Helen Ahrens, CEO of digital marketing agency, Good Things Marketing.

ompanies are now awash with data. As marketers, we have access to more tools, data and analytics than ever before. Measurement of marketing strategies, goals and implementation has never been so easy, however, when it comes down to the crunch are we measuring vanity metrics rather than metrics that matter? Another issue corporates struggled with last year is a misalignment between the metrics the C-Suite want to measure and what the marketing team deem to be better indicators of success. For example, whether its measuring return on investment and bottom line metrics compared to clickthrough rates, brand reach and conversion tracking with pixels tools, departments must come to an agreement on what really counts. Ahrens knows one thing for sure, “we’re all swimming in a sea of data and unless you laser focus on one critical number to measure for each strategic marketing goal, based on business outcomes, you’ll drown!”

GOOD THINGS MARKETING’S TOP FIVE FOR 2017:

1. Vanity metrics to metrics that matter The proliferation of data across business and marketing means that capture and analysis of complex information is now at the tip of our fingertips on cool dashboards across our devices. 2017 will be the year teams start working to ensure that data, metrics and analysis

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are providing real insight into a handful of metrics which will allow the C-Suite to make strategic decisions faster and better. It’s all about finding your critical number. Once you assign a critical number to a task, process or job role you’re going to be able to really hone in on that one metric and get it spot on. 2. Influencers will be more influential The visibility and influence of bloggers and social media influencers will intensify in 2017 and continue to disrupt the media environment. The audience, reach and engagement that influencers can provide using social media platforms as their hangout of choice, means that millions of people can be reached by engaging certain influencers or groups of influencers. GTM was recently involved in an expedition to Port Lincoln for tourism marketing with 22 influencers with a combined audience 1,007,500 and reach 2 to 4 million audience. GTM has just released an analytics report on the social media influencers effectiveness, indicating that the potential return on investment for Adventure Bay Charters would be $0.002 per view and approximately $1 per lead. 3. Digital personal branding embraced by the big four and others The big four accounting firms are investing more time and money into getting their senior and executive employees onto digital. Gone are the days of stiff suits. www.businessfirstmagazine.com.au

MARKETING| BFM

Partners are being encouraged to expand their reach and engagement via LinkedIn, Twitter and blogging. Ahrens says, â&#x20AC;&#x153;those at the forefront of doing big and bold personal branding are often at the top of the ladder, are winning bigger contracts, retaining their best accounts and being recognised internally as they gain company accolades.â&#x20AC;? Aaron LePoidevin is a Partner at PricewaterhouseCoopers and is a great example of a new generation of partners in the big four heavily using social to build his own brand and, most importantly, his client portfolio in the global innovation and incentives market. 4. CMOs and CTOs will become besties Well maybe not quite! As the tech stack is bedded down corporates who are using different martech platforms such as Salesforce, Hubspot, Marketo and Pardot are starting to reap the benefits of implementation. CTOs will continue to need to loosen the reigns a little as marketing departments (and other teams) continue to take tech into their own hands and work collaboratively together. 5. Keep it social There are a number of companies that are killing social right now, however, small business and Business to Business specifically are not reaping the benefits of accessing and retaining their clients via social. Mass communication is dead, we can now be hyper-targeted and hyperlocal and drill into tiny segments which was never possible before. The capabilities of emerging social platforms and others more traditional socials such as the giant Facebook will continue to keep disrupting this space as we continue to spend more of our marketing budgets with these guys. So, bring on 2017. Marketers have it better than ever before, we just need to continue to focus, pick the right tools for the right job and remain alert. Disrupt or be disrupted! BFM www.businessfirstmagazine.com.au

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BFM | TECHNOLOGY

TECHNOLOGY WARS AND THE MODERN SUPER FUND

It’s taken a while but it’s finally happened: the technology revolution that has savaged industries like banking, car manufacturing, retailing, music, media, education and severely embarrassed the commonwealth government through its 2016 Census and Centrelink debt data matching debacles – just to name a few - is now destabilising superannuation writes Alex Dunnin.

f you consider what the business of superannuation and running super funds actually is – processing transactions, administering investments, reconciling accounts, managing tax liabilities, deducting fees, making payments to fund members, communicating with consumers and following myriad regulations – none of this should surprise you. Instead the real surprise is that the superannuation sector has been able to survive so long on legacy systems built on old world

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communications platforms for an era with slower and lower corporate and consumer expectations. But in the modern contemporary instant online integrated post-modern world that demands high levels of transparency, transaction speed and interoperability, these old systems just don’t cut it anymore. Super funds which are unable to satisfy member expectations on these fronts are simply unlikely to survive. Super funds are impacted by technology in three core ways:

how their consumers interact with them, how funds are administered and the fund’s investments. The consumer side is the most visible impact because this is what fund members see first whether it be the fund’s website they are viewing, the smart phone they are using to view their account online, the tablet computer they are using to execute transactions and switch investments while commuting home on a train, or the online financial advice they are accessing via a web robot. www.businessfirstmagazine.com.au

TECHNOLOGY| BFM

But while fund members now take these features and capabilities for granted, these functionalities are possible only because of the radical transformation that has happened to super fund administration in their back offices. This transformation is so thorough that what would have passed for best practice super fund management a decade ago, when many funds were still being run off the back of spreadsheets, would not even qualify their operators for a financial services license today. The changes this transformation entails include the ability to handle electronic contributions and payments, real-time investment switching, up to date account balances and monitoring when contributions have been paid into members’ accounts – some fund administrators even send members www.businessfirstmagazine.com.au

text messages to let them know these details as a protection against employers who sometimes don’t pay superannuation contributions as regularly as they are meant to. One by-product of this is that super funds now openly recognise technology, data security and online identity theft as major risks on par with the investment and compliance risks that used to dominate their governance planning. Another is the increase in the number of funds appointing chief technology specialists to their senior management teams and boards, a trend started by the retail funds run by Australia banks and insurers but which has since begun to be followed by several of Australia’s leading not for profit funds. Almost all not for profit super funds now having digital specialists. ANZ Banking Group last year recruited the former head of Google’s Australian operations, Maile Carnegie, to help drive its digital and technology development strategy. This follows the lead CommBank has established in FinTech, its initiatives in pioneering Blockchain in Australia and even experimenting with artificial intelligence. Westpac-owned BT Financial Group is meanwhile set to shake up the investment and superannuation market with its Panorama platform, which is a total rearchitecture of its technology platform. The platform is said to have cost the fund hundreds of millions of dollars. This emphasis on digital delivery and technology driven features like investment flexibility, mobile account access and the ability to package choices leads, however, to the ironic position that super funds are not always judged on their investment acumen but by these features – a shift that not all superannuation members may welcome. This has forced not for profit funds, funds that have traditionally delivered better investment outcomes than their retail rivals, to respond. But as they are much bigger users of external administration specialist companies, they have had to focus

on fund consolidation to achieve scale, or put pressure on their service providers to deliver much improved technology capability. In 2015 fund administrator SuperPartners was acquired by the Link Group. This has precipitated significant advancement in the technology capability of many of their industry fund clients, with several now positioning to directly match up against their bankowned rivals. It’s clear that the technology race is not over by a long way. Reinforcing this is how other groups have been able to use this to enter and shake the market, for instance technology groups like Bravura Solutions, that services super funds with specialist administration platforms. The third area where technology has had a dramatic impact on superannuation is in investment management. It wasn’t too long ago that transactions worth tens of millions of dollars were still handled by paper fax. Today they are processed digitally through global portfolio systems and exchanges. Indeed investments not able to interact with these global platforms are now very unlikely to attract willing investors. The false start of cryptocurrencies leading to the development of Block Chain and its adoption by mainstream exchanges and banks to drive down transaction costs is just another example of how new technology frontier will benefit super fund members. This investment technology is also leading the development of new breeds of products that deliver large scale technology features to small investors such as real time taxation reporting and the ability to carve-out unwanted stocks from pooled fund portfolios using modern platforms such as Managed Accounts albeit these capabilities are also now being implemented into traditional super funds as they switch across to new modern platforms built on these feature sets. BFM Alex Dunnin is director of research at the Rainmaker Group, publisher of the superannuation comparison service SelectingSuper.

BUSINESSFIRST MAGAZINE

BFM | FEATURE: 2017

Could interest rates rebound in 2017 Despite the cash rate remaining at 1.5%, as widely tipped, murmurs of a rate rise are emerging for the first time in over six years, according to finder.com.au.

he cash rate decision for December 2016 was widely expected by market analysts with all 35 experts and economists from the monthly finder.com.au RBA survey forecasting a rate hold. Despite the Reserve Bank’s choice to leave the rate unchanged this month, 52% (14) of experts and economists are expecting at least one rate drop next year, with four experts expecting the rate to be cut again in February. Interestingly, 26% (7) of experts and economists who forecast movements in 2017 are predicting a rate rise. The last cash rate increase was in November 2010. All but two of these economists are expecting a rate rise to take place in the second half of the new year. Mortgage Choices’ Jessica Darnbrough and the University of Queensland’s Clement Allan Tisdell are both forecasting a rate increase in March 2017. Graham Cooke, Insights Manager at finder.com. au, says with rate rises on the horizon, now could be a good time to lock in a competitive mortgage rate. “We haven’t seen much talk of rate rises in over six years, but as 2016 draws to a close we’re starting to see a significant number of predictions that the next RBA rate movement may be in a positive direction. “We’ve already seen some lenders lift rates independently of the Reserve Bank, including Westpac and Bank of Sydney, and it’s likely this will be a theme in the new year, so mortgage holders may want to

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consider locking in a competitive rate before the tide starts to turn. “A fixed rate removes the uncertainty of rate rises, and particularly out-of-cycle rate rises, which can help you manage your cash flow and your household budget. However, just be mindful that you won’t benefit from lower repayments if rates fall below your secured rate. “When comparing fixed rate loans online, view the comparison rate as this reflects the true cost of the loan, including any major fees and charges,” he says. When asked about recent regulations introduced to curb foreign investment in the local housing market, 42% (11) of experts who weighed in on this issue thought these regulations could drive down Australian house prices by up to 10%. However, the majority (58%, 15) believed regulations would have no impact on the property market. “Any reduction in foreign investment in capital cities could put downward pressure on house prices, however with the Australian economy looking relatively healthy on other metrics,the effect is likely to be minimal,” Mr Cooke says. Looking back on predictions for the finder.com. au RBA survey for 2016, experts and economists’ forecasts were 86% accurate, which is up from 2015 where predictions were correct 79% of the time on average. www.businessfirstmagazine.com.au

FEATURE| BFM

Savanth Sebastian, CommSec (Hold): “The Reserve Bank seems comfortable with how the economy is evolving. The recent lift in commodity prices would provide more confidence that medium term growth prospects have improved.” Dr Andrew Wilson, Domain Group (Hold): “The RBA will hold given that it is the end of the year, as well as the fact that there will be a relative lack of impact from any change.” Scott Morgan, Greater Bank (Hold): “There is no imperative for the RBA to change rates at the moment. The RBA and the rest of the world is watching the United States, particularly in relation to changes in that country’s interest rates.” Mark Brimble, Griffith University (Hold): “The number of moving parts continues to increase and while the bias remains to the downside, the RBA is likely to sit on the sidelines and wait for the dust to settle and hope that consumers will spend over the festive season to support the economy.” Peter Haller, Heritage Bank (Hold): “The RBA will wait to see the next quarterly CPI print before considering any further changes to the cash rate.” HERE’S WHAT FINDER.COM.AU EXPERTS HAD TO SAY: Jordan Eliseo, ABC Bullion (Hold): “We remain steadfast in our view that this easing cycle has a lot longer to play out. Despite that, we doubt the RBA will want to move before Christmas, and will wait for further data before making another rate cut in Q1 2017.” Shane Oliver, AMP Capital (Hold): “Not enough has changed since the last meeting to justify a change.” John Hewson, Australian National University (Hold): “Treading water to see how global events unfold and to consider domestic numbers as they are released.” Alison Booth, Australian National University (Hold): “No significant changes in economic fundamentals since the last meeting.” Peter Munckton, Bank of Queensland (Hold): “The RBA expects inflation to rise in 2017.”

Shane Garrett, Housing Industry Association (Hold): “The current rate is appropriate given the mix of subdued inflationary pressures and reasonably robust economic growth.” Alex Joiner, IFM Investors (Hold): “The RBA currently seems comfortable with policy settings as long as inflation is heading back towards target.” Robert Montgomery, Infrastructure Partnerships Australia (Hold): “The RBA will hold rates at 1.5% and wait for further data releases before making a change to the cash rate.” Michael Witts, ING Bank (Hold): “The global interest rate outlook has moved sharply towards higher interest rates following the US election. Against this background and solid domestic economy the RBA will be on hold for an extended period.”

Richard Robinson, BIS Shrapnel (Hold): “(The) dollar has come down, so no need to cut rates. A rate cut is not desirable until the housing market starts to weaken.”

Leanne Pilkington, Laing+Simmons (Hold): “It’s the prudent course. The cost of borrowing is affordable for those genuinely looking to buy and while it appears the next rate movement will be up, subdued economic growth at the moment means an increase should be some time away yet.”

Paul Dales, Capital Economics (Hold): “The RBA is unlikely to play either Santa or Scrooge as the disappointing weak activity, employment and wage data has been offset by the impending boost to the economy from the leap in commodity prices.”

Nicholas Gruen, Lateral Economics (Hold): “Because it is consistent with what the bank has said, even if it makes little sense to me.”

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BUSINESSFIRST MAGAZINE

BFM | FEATURE

Stephen Koukoulas, Market Economics (Hold): “The RBA refuse to note the record low inflation rate and wages growth, which in normal circumstances would demand lower interest rates. It looks like being a policy error.” Michael Yardney, Metropole Property Strategists (Hold): “The RBA will hold rates at 1.5% They are likely to take a wait and see approach to what’s happening to overseas rates at a time when the economic data does little to alter the RBA’s outlook for the Australian economy. Also the strong Sydney and Melbourne housing markets don’t need any extra stimulus.” Emily Dabbs, Moody’s Analytics (Hold): “Inflation has shown signs of improvement and the unemployment rate remains low, supported by accommodative monetary policy. Further easing is unlikely at this stage given rising house prices and expectations of U.S. rate hikes.” Jessica Darnbrough, Mortgage Choice (Hold): “The Reserve Bank would be keen to see what the US Federal Reserve does with rates before it makes any adjustments to the current monetary policy setting.” Ken Sayer, Mortgage House (Hold): “The downward pressure on rates has been overshadowed by international influences.” Saul Eslake, Economist (Hold): “Nothing has happened since the last meeting to have persuaded the RBA that current monetary policy settings need to be adjusted in order to foster stable growth and a return of inflation to the target range over time.” Alan Oster, Nab (Hold): “It’s too early yet to judge what impact RBA’s actions have had on the economy. Worries about the economy offset by house prices. Inflation still low but can wait.” Jonathan Chancellor, Property Observer (Hold): “The last rate cut is still working its way through the economy, so the board’s wait and see will dictate no further change this year.” Matthew Peter, QIC (Hold): “The RBA finds itself in a very constrained space. Tepid economic activity, lacklustre business investment

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combined with a weak labour market and low wage growth call for lower interest rates. However, an overheated housing market, an improving global economy, rising terms of trade and moderating currency suggest rates should remain on hold or even rise. Caught between these countervailing forces, the RBA will remain on hold at their coming December meeting.” Noel Whittaker, QUT (Hold): “(The RBA is) awaiting the USA decision.” Angus raine, Raine & horne (Hold): “(It’s) same same with economy.” Christine Williams, Smarter Property Investing (Hold): “Unemployment has risen slightly around Australia.” Janu Chan, St.George Bank (Hold): “Reaction to upcoming GDP data, which we expect to be weak. If there is any comment on housing construction in the wake of recent building approvals data, and as always, the final paragraph for any guidance on policy.” Steven Milch, Suncorp (Hold): “The inflation and growth outlook are not sufficiently changed since the November meeting as to warrant a cash rate change.” George Tharenou, UBS (Hold): “We believe the RBA has drawn a “line in the sand” at the 1½% y/y pace for underlying inflation, given it is the lower bound of every single point forecast the RBA has out until the end of 2018. If underlying inflation were to drift below this in coming quarters, the RBA would likely feel under some pressure to further lower the cash rate. Absent this, we see the RBA on hold at 1.5% for the foreseeable future.” Clement Allan Tisdell, University of Queensland (Hold): “Wise to wait until the US rate changes or a significant change in the Australian economy becomes apparent.” Bill Evans, Westpac (Hold): “The Board is certain to keep rates on hold despite the prospect of a weak print for GDP growth in Australia in the September quarter.” 1

Experian Hitwise since 2015 BFM

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FEATURE| BFM

Influencer Marketing Predictions for 2017 With an average ROI (return on investment) of $6.50 for every $1 investment, there’s little wonder why brands are choosing to integrate influencer marketing into their marketing mix writes Victoria Hamilton Managing Director at The Exposure Co.

ast year, 86 percent of marketers engaged influencers for branded promotions, and nearly 50% of them are looking to double their investment in 2017. With budgets rising, it’s more important than ever to tap into the trends and plan strategies accordingly. Here are my top four predictions for Influencer Marketing in 2017. 1. Influencer marketing will become more accountable As more brands and agencies turn to influencer marketing, the need for accountability will increase. Marketers need confirmation that it’s affecting their bottom line and will look to metrics such as cost per engagement, sales and revenue lift to justify growing budgets. 2. The rise of the intimate influencer While it was once the celebrity, top tier influencers that were

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considered the best pick, more brands are beginning to think otherwise. In such a lucrative industry, it will be the influencers who stay true to their audiences by providing value and inspiration, while balancing sponsorships cautiously, who will be the most sought after by brands. 3. Increase in cross-platform promotion Say goodbye to the one-off sponsored posts, and hello to cross-platform promotion. This year we will see a rise in influencers mentioning brands on their multiple channels of influence. In addition to their carefully curated sponsored posts, influencers will be engaged to promote brands via Instagram stories, Snapchat and Facebook live. The raw, personable aspects of these channels help provide a new dimension to traditional sponsored posts and will be key to building

increased brand awareness, value and trust. 4. Transparency between online and offline promotions As influencers continue to grow in importance and value for brands, we can expect to see them engaged for more offline opportunities as part of their brand collaborations. Digital influencers will be invited to join their celebrity counterparts at offline launches, events and other appearances – with the expectation to document their experience online, of course! BFM The Exposure Co. connects brands with leading Instagram and Snapchat influencers. The Australian based business was founded in 2013 to fill a need for a reliable and time efficient solution for brands seeking to identify and build effective relationships with influential Instagrammers.

BUSINESSFIRST MAGAZINE

BFM | INVESTMENT: 2017

Investment & Economic Review January 2017 The final quarter of 2016 was extraordinary in many ways. Share prices, which had hitherto been volatile but generally slack, had a powerful recovery; interest rates, which had been dormant, started to rise; and commodity prices surged â&#x20AC;&#x201C; coal, iron ore and oil all breaching twice their respective prices of last January. By Alex Moffat, Director Joseph Palmer & Sons.

stensibly, a man called Trump is partly responsible for surging markets, though more plausible is the surprising likelihood that the Republicans control of all three arms of the US government. Lower tax, big spending on infrastructure and a protectionist push-back against globalisation are apparently on the agenda, though the actual policy musings of the new administration are so haphazard that seemingly anything is possible. One thing for sure is that the US is altering its domestic economic and foreign policy standings, which will inevitably lead to some strained geo-political relationships and bouts of sharp market volatility. Domestically, the Australian economy slipped negative in the September quarter, but should bounce back sharply when the statistics are next reported due to recently higher commodity prices improving

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the terms of trade. However, there are two rather disquieting economic trends emerging, being the seemingly insatiable rise in consumer debt, and the intractable drift towards underemployment. Average Australian household debt now represents about 180% of disposable income, an alarming figure given that the comparable figure in the 91/92 recession was just 70%. Dealing with this problem is a critical emerging social and political problem, as without a satisfactory solution the day of reckoning will be ugly. Debt affordability of course doesnâ&#x20AC;&#x2122;t matter too much if house prices remain strong, wages keep rising and interest rates stay low. Unfortunately, house prices will stop rising, and disinflation, job and process automation and globalisation are already stymying wage growth, but interest rates are likely to stay very low. www.businessfirstmagazine.com.au

INVESTMENT: 2017| BFM

displacement by automation and globalisation has some parallels to recent United States and European experiences. Mainstream US took what they hope to be positive action by electing a populist on an â&#x20AC;&#x2DC;Iâ&#x20AC;&#x2122;ll-fix-itupâ&#x20AC;&#x2122; agenda. Time will tell as to whether this succeeds, and inevitably a similar political perspective will arise here.

Source: Reserve Bank of Australia & Australian Bureau of Statistics

The Australian Bureau of Statistics has maintained data about underemployment for decades, but only recently has it become an issue worthy of debate and concern. Underemployment is defined as full time workers who are working fewer hours than normal due to economic reasons, plus part time workers who would like, and are available, to work more hours. The underemployment rate in Australia is currently an alltime high 8.5%, represented as 6.8% for males, 10.4% for females, 17.4% for the 15-24 age cohort, and for the low-skill group classification a staggering 21.1%. Each of these has risen significantly in the last few years. Clearly, dealing with the household debt problem will be very difficult in a time of rising underemployment. This affliction of debt, underemployment, job www.businessfirstmagazine.com.au

AUSTRALIAN SHARES With the US presidential changeover imminent, the Australian stock market commenced the December quarter in an uncertain mood, and retreated by a few hundred points in late October and early November. However, the unexpected US election result triggered a bout of volatility, then a sustained rally that drove share prices to their year-high by the end of December. Consequently, the Australian ASX 200 Index rose by 5.2% for the quarter and 11.8% for the year, inclusive of dividends. The recent improvement in share prices has occurred without a lot of fundamental support, as corporate earnings and economic activity have remained relatively subdued. A propensity for companies to buy back shares and maintain high dividend payout ratios has helped, particularly whilst interest rates remain very low. Within our managed share portfolios ANZ Bank, CBA, BHP, Westpac and Woodside all performed well in the December quarter, whilst some of the shares that did well in the previous year, such as CSL, Sonic, Ramsay and Wesfarmers were relative laggards recently. One market analytical methodology we follow for the US market is the cyclically adjusted Price/Earnings ratio, commonly known as the CAPE ratio or Shiller P/E. This measure uses inflation adjusted company profits from the last ten years, and is currently indicating that the US market is at a high level. Similarly, our proprietary Relative Value Analysis system has assessed fair value of about 5700 index points for the Australian ASX 200, which is where the market is now trading. Market valuations of course are rather inexact, and methodologies such as CAPE are not short-term indicators, so share prices might remain close to or in excess of fair value for some time. It is prudent and tactically appropriate to take some advantage of higher prices, and make some modest reductions to share investments. We did just this recently by selling shares such as Lend Lease to further reduce our exposure to the property sector (we sold Stockland earlier in 2016), and QBE Insurance as their price rose with the Trump inspired rise in US interest rate expectations. We also trimmed some portfolio investments in ANZ Bank, Wesfarmers and Sonic Healthcare. Consequently, our managed share portfolios commence 2017 with more cash than usual, in expectation of reinvestment during the course of the coming year. Looking forward, there are multiple events in 2017 that are likely to correspond with some market volatility. These include crucial elections in France and Germany, possibly dramatic policy changes in the

BUSINESSFIRST MAGAZINE

BFM | FEATURE

early stages of the Trump administration (and even more dramatic associated rhetoric!), and reactions to a general lack of sustainable economic growth. Looming also is the worrying and seemingly inexorable rise in household debt, and the economic contraction that would occur should house prices fall, employment conditions tighten, interest rates rise, or perhaps all three. GLOBAL SHARES International shares suffered an awful start to 2016 but powered to a very strong finish, particularly in the period post the US election. Of the major markets, only China suffered a negative return for the year whilst Britain, the US and Germany (almost) reached record highs. In America, the large cap Dow Jones share index performed better than the broader S&P 500 and NASDAQ markets due to the strength of the financial and industrial titans such as JP Morgan, Goldman Sachs, Caterpillar and Chevron in the December quarter. The consumer defensive and healthcare sectors including stocks such as Coca-Cola, Procter & Gamble, and Nike, which had performed well in recent years, underperformed in 2016. Many British shares, particularly those with continental European or global earnings benefitted enormously from the very weak pound, which followed the Brexit referendum. Elsewhere in Europe, Germany suffered from the market’s (fortunately temporary) concerns about Deutsche Bank; Italy had its own issues with the voting down of December’s constitutional reform referendum, and the financial strife encountered by the five-hundred-year-old Monte dei Paschi di Siena bank; whilst some Swiss and Scandinavian shares were moderately weak. Asian markets performed relatively poorly in 2016, but for a very quick rise in the Japanese market in November/December. Chinese shares were generally subdued, and were notable for their quiet period after a couple of years of wild volatility. Indian shares went against the global trend and fell in the final quarter, caused by looming protectionist policies in the US and their effect on IT outsourcing growth. India is in the midst of significant monetary, economic and governance reform engineered by their progressive Prime Minister, Narendra Modi, and is one of the fastest growing economies – ingredients that make their stock market more appealing in future. Looking forward, the higher priced global markets have limited the range of good value investment options, so a higher cash position for investors is prudent, pending better-valued opportunities when they emerge. PROPERTY SECURITIES The property related securities (known as REITs) that are listed on the Australian stock market had an unusually volatile year in 2016, rising sharply in the first half due to effect of the low interest rates, falling sharply after they became overpriced, then rising

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again late in the year. This pattern necessitated some portfolio alterations, so we raised a large cash position in our REIT managed model mid-year, reinvested this during November, then reverted to 20% cash at yearend. Valuations of the REIT sector securities are now fairly high, as the periods of price appreciation in 2016 were driven by the compression effect of low interest rates, more than their specific real estate fundamentals. Within the REIT sector the individual securities are generally classified in accordance with their type of underlying real estate, being commercial, industrial, retail or residential. Each of these sectors is considered for our recommended or managed property-focused portfolios. In commercial real estate, we have invested in or recommended Dexus Property Group and Investa Property Fund. Dexus own approximately 100 large commercial and industrial properties, and Investa owns a large portfolio of high-grade CBD office buildings. Our managed portfolio also owns securities in GPT Group which owns and manages a diversified collection of retail, office and business park assets. In retail, we’ve invested the BWP Trust which primarily owns Bunnings occupied properties, and in Vicinity Centres, Scentre Group and Westfield (Scentre owing the Australian based Westfield shopping centres, and Westfield owning those overseas). Industrial property exposure is achieved via our investment in Goodman Group which has a large portfolio of more than 400 industrial properties around the world. In the residential sector, we own units in Aveo Group, which has a retirement living focus, and Stockland which has a blended a portfolio of commercial, retail and residential assets. Looking forward, the REIT sector has two potential problems, being the negative effect of higher interest rates, and the possibility of plateauing or falling real estate values. The interest rate risk is more to do with shifting capitalisation rates should long-term bond rates rise, rather than the a RBA cash rate rise, which is unlikely for a while. INTEREST RATES The long period of falling interest rates came to an end late in 2016, partly because in many countries www.businessfirstmagazine.com.au

FEATURE| BFM

prefer a yield of over 3% before lengthening portfolio duration. Our interest-bearing portfolio is heavily invested in cash and term deposits, both of which provide a very high level of capital security, but a low return. Cash deposits will remain a component of the portfolio as this capital preservation is the most important element that investors seek.

they couldnâ&#x20AC;&#x2122;t go any lower (they were already zero or negative) and partly due to the growth agenda proclaimed by the new American administration. Australiaâ&#x20AC;&#x2122;s Reserve Bank lowered its cash target rate twice in 2016, both 0.25% adjustments, such that the cash rate is just 1.5%, an unprecedented low rate. The long-term rate in Australia is typically driven by domestic factors such as inflation and commodity prices, and overseas trends. Consequently, the sharp rise in US bond yields, from 1.5% to 2.5% in the second half of 2016 caused Australian long term rates to rise similarly. However inflationary expectations, the primary driver of long term rates, remains fundamentally subdued, due to disinflationary forces such as automation and globalisation. Consequently, Australian interest rates both short term and long term, are unlikely to rise much during the coming year. The listed income security and hybrid market enjoyed a very good second half of 2016, with most security prices rising as credit spreads contracted. Bank hybrids benefitted from a hunt for yield, the positive performance of bank shares, and an absence of much new supply. Some of the longer duration hybrids now have their risk components a bit overpriced, so we are generally seeking to reduce portfolio exposure to longer-term credit risk, and focus more on shorter duration investments. The long-term bond market became materially overpriced during 2016, so we generally avoided portfolio exposure to this sector. The higher rates that now prevail reduce this risk a bit, but we would

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OUTLOOK After a shaky start 2016 turned into a decent year for investors, as share prices, real estate values and credit security prices all rose. In 2017 the outlook is less certain, as the year has commenced with relatively high share and real estate prices, and some of the economic signals are turning negative. Volatility caused by political events is a near certainty this year as a consequence of the significant directional policy change of the new United States presidency, a more assertive foreign and economic policy out of China, the forthcoming elections in France and Germany, and the anxiety that global populism will cause policy disruption. In this environment, it is sensible to invest with a higher degree of caution, and to maintain more cash than normal - the rationale being that cash can act both as a capital preservation buffer, notwithstanding the low interest rate, and provide for reinvestment opportunities as the year progresses.

Article supplied by www.jpalmer.com.au. BFM This publication has been prepared by Joseph Palmer & Sons (ABN 29 548 490 818) an Australian Financial Services Licensee (AFSL 247067). Whilst the information contained in this publication has been prepared with all reasonable care from sources, which Joseph Palmer & Sons believes are reliable, no responsibility or liability is accepted by Joseph Palmer & Sons for any errors or omissions or misstatements however caused. Any opinions, forecasts or recommendations reflects the judgment and assumptions of Joseph Palmer & Sons as at the date of publication and may change without notice. Joseph Palmer & Sons, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any securities recommendation contained in this publication is unsolicited general information only. Joseph Palmer & Sons are not aware that any recipient intends to rely on this publication and are not aware of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors must obtain individual financial advice from their investment advisor to determine whether recommendations contained in this publication are appropriate to their personal investment objectives, financial situation or particular needs before acting on any such recommendations.

BUSINESSFIRST MAGAZINE

BFM | RESPONSIBLE INVESTMENT

Responsible Investment: from niche to mainstream force in finance By Simon O’Connor, Chief Executive Officer, Responsible Investment Association Australasia

hen the globe’s corporate leaders met in Davos in January, their agenda was full of reflection on the economic consequences of social unrest, inequality, poverty, political upheaval, pollution and climate change. All of these traditionally non-economic issues now form the core focus of this most important annual gathering of the world’s economic elites. HOW HAS THIS BECOME SO? It has become ever clearer that when these social and environmental matters are not addressed, the economy falters. As the CEO of Unilever, Paul Polman, recently said, when droughts engulf emerging market countries, people don’t shower, so don’t buy soaps and shampoos – their business suffers. When inequality leads to social unrest and unpredictable political outcomes, investment certainty disappears and businesses don’t invest. Poverty, poor health, pollution all result in greater stretch on government budgets resulting in less public funds for important infrastructure. In all cases, the economy suffers. Sustainability – social, environmental and economic – is a critical precursor to economic prosperity. The Australian business community has certainly noted that a more responsible approach to business - one that respects workers, the environment and communities - results in stronger businesses, more loyal, productive employees, and stronger market share from the ever more discerning consumers. Rather than being altruistic or philanthropic, a responsible business is entirely consistent with a long-term strategy that delivers returns for shareholders, and hence is squarely within the duties of directors to pursue. The links between these so called non-economic issues and the economy have now been well established, which is why Davos spent so much time contemplating more inclusive growth, responsible business, and how to finance a more sustainable world. However, it’s not only business that have joined these dots that lead towards stronger and more prosperous businesses. Today in Australia, the investment industry is also firmly focusing on this link as a way of identifying companies most likely to deliver strong investment returns. Nine of Australia’s ten largest fund managers have committed to taking a responsible approach to the way they invest their assets. Over half of all professionally managed assets in Australia – or $630 billion – are

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now invested by investment organisations that have made such a commitment. That is, each of these investors has committed to systematically assessing the environmental, social and corporate governance (ESG) risks of every company and asset they invest in. Right now in Australia, if you are a listed company, or seeking capital investment from financiers, these ESG factors are being scrutinised as a key element of an investment due diligence, whether you know it or not. What is true for business - that good responsible and sustainable business makes good sense - has also become a proxy for investors to determine good investments. It is precisely this link that has led to a surge in responsible investment across the globe. Currently, around 30 per cent of all professionally managed assets globally are managed by investors who have committed to a responsible investment approach – approximately $US 21 trillion in assets under management – according to the Global Sustainable Investment Alliance. Why? Less sustainable companies pose greater investment risks, whilst more sustainable and responsible companies offer great investment opportunities. When some of the world’s leading corporate minds told us recently at Davos that an additional $12 trillion in market opportunities could be unlocked by 2030 by taking a more sustainable approach to business, investors see a massive upside opportunity to achieve alpha in their investments - something hard to find in a low yield world. RESPONSIBLE VERSUS ETHICAL: Often confused are two distinct approaches: ethical investing involves informing investment decision with values and beliefs and usually includes the screening out of industry sectors, most commonly tobacco, controversial weapons, gambling, fossil fuels and pornography. Responsible investment is not led by values-based decisions, but rather focuses on the investment risks posed by environmental and social factors, and an investee company’s ability to manage these risks. Climate change risks, human rights, corporate governance, managing water and pollution, regulatory risks and so on all form key ESG risks that investors around the globe are assessing on a daily basis. The investment community of the world has not suddenly shifted to become superheroes for the planet, but rather they’ve seen the evidence that www.businessfirstmagazine.com.au

RESPONSIBLE INVESTMENT| BFM

highlights the strong correlation between companies exhibiting strong ESG management and their long term financial performance. Research out of the Harvard Business School found that companies with stronger ESG practices present lower risks, attract a lower cost of capital, experience increased operating efficiencies and gain greater expansion into new markets. Our own research that we’ve commissioned annually for 16 years highlights how responsible and ethical investments can outperform their mainstream equivalent funds. The Responsible Investment Benchmark Report 2016 highlighted how responsible Australian equities funds outperformed mainstream funds and the ASX300 across 1, 3, 5 and 10-year time horizons. These economic opportunities through more responsible and sustainable business practices that were discussed in Davos are precisely those investment opportunities that an increasing proportion of the finance sector are chasing in their investment decisions every day. Furthermore, in the same way that consumers are

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increasingly seeking out more ethical and responsible products – those sourced from sustainable resources and that pay workers a fair wage – and are now seeking out responsible and ethical superannuation, banking and investment products. There has been a doubling of funds flowing into ethical investment products in the last two years, reaching $50 billion with demand showing no sign of slowing down as consumers seek to ensure their own retirement savings are aligned with their beliefs and values. In the same way that a responsible approach to business is increasingly demonstrated to be a branding advantage, financial institutions are rapidly positioning themselves to highlight their responsible investing bona fides to attract the smart, values based investors. When we consider that we are entering a period that will see the largest transfer of wealth the world has ever witnessed, from baby boomers to millennials who are increasingly guided by values and purpose, this estimated $30 trillion inheritance will only continue to heighten the need for both responsible business and responsible investment. BFM

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BFM | INVESTMENT 2017

TOUGH TIMES AHEAD FOR AUSTRALIAN AND US STOCK MARKETS The Australian and US stock markets are set for a bumpy ride this year, says the analyst who publicly called both the GFC downturn and the GFC low in advance.

avid Hunt, whom the Financial Review has called The Bellringer, says interest rates will rise throughout the year, causing the ASX AllOrdinaries Index to fall in tandem with a huge slump in the Dow Jones Index in the last quarter of 2017. The markets will then take a couple of years to recover, predicts Mr Hunt, who is the founder and chief strategist for the Profit Hunters Group and a regular markets commentator on Sky Business News. “The second half of this year will be a much tougher time for equities than the first half,” says Mr Hunt. He has drawn up charts that show the predicted cycle for this year on the All Ordinaries and the Dow. “According to my research, the All Ordinaries will peak in January, reach its lowest level in September and recover slightly by November, with the ASX200 dancing to a slightly different tune” he said. “The Dow, however, will peak in mid-July, then fall sharply to its lowest point in November. The slump is likely to last for a couple of years.” The ASX 200 has risen 22% since February but Mr Hunt says this rally will not last because rising interest rates will lure investors to higher-yielding cash rates, which are safer than equities. The first step in higher rates was taken after the US election last year, when the US Federal Reserve raised its official rate from 0.5% to 0.75%. The Dow slump into November will be severe because: • Instead of the US Federal Reserve pumping easy money into markets, there will be demand for capital not seen for many years as the US funds the infrastructure promised by incoming US President Donald Trump. • The US government will spend money to build bridges, create jobs, and run budget deficits. The government’s demand for money will draw funds out of other sectors such as equities. US bond prices will also fall as 2017 progresses as China moves away from investing in US bonds. This coincides with the Fed turning its back on quantitative easing and no longer supporting bond prices. Higher US interest rates will push up rates here because Australian banks need to borrow from offshore. And like in the US, rising interest rates here will lure investors to safer, higher yielding cash rates and that may threaten Australia’s property boom. “I would not be surprised if this is the year that the public gets interested in the stock market again in a big way,” he said. “But interest rate rises will choke off people’s exuberance for the stock market because they will find they can put money in the bank and get a good interest rate instead of buying bank stocks.” Every year since 1992, Mr Hunt has published in

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advance charts that predict the highs and lows for that year in Australia and the US. He presents them to the Australian Technical Analysts Association, releases them to his clients, and publishes them on his website. His previous forecasts correctly predicted the tech wreck in March 2000, the pre-GFC high in November 2007 and the GFC low in February 2009. Below are his charts outlining what’s in store for equities this year. BFM

ASX ALL ORDS FORECAST 2017 August

January

November

June September Source: David Hunt adest.com.au 1

DOW JONES INDUSTRIAL AVERAGE 2017 FORECAST Mid July*

Mid Feb Mid Jan

Early April

mid Nov

Source: David Hunt adest.com.au

David Hunt is a technical analyst and futures trader who appears on Sky Business TV’s ‘Your Money Your Call’ every month. He was dubbed The Bellringer by the Financial Review for his ability to call market tops and bottoms publicly in advance - including the GFC. During his career, he has been a Qantas forex manager, a house trader with Macquarie and the president of the Professional Technical Analysts Association. He now advises financial advisers and other clients on equity, bond, forex and commodity markets in his role as chief strategist with Profit Hunters. Information about his weekly webinars can be found at www.profithunters.com.auy www.businessfirstmagazine.com.au

INVESTMENT 2017| BFM

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BFM |INVESTMENT FEATURE

TECH STOCKS TO WATCH ON THE ASX IN 2017 By Gabriel Yi, Managing Director of M3 Investment Group

echnology advances have created some of the most valuable companies in the world and the tech sector reflects one of the true growth sectors in the stock market. Think Apple, Alphabet, Amazon - most reside in the technology hubs of Silicon Valley, and continue to innovate and introduce new products and services to drive their growth. However, most of these tech behemoths are listed overseas which begs the question: are there opportunities here in the Australian market? Although the tech sector tends to be comprised of capitallight businesses with strong growth prospects, it still represents a very small proportion of the ASX 300 and for the longer term investor, may reflect strong opportunities. There are some interesting developments to watch in 2017. Appen Limited (APX.AX) is a global technology company specialising in speech and search technology services. Its impressive client list includes multinational tech companies, governments, automakers, and social media leaders. 2016 proved to be a fantastic follow up year after its IPO listing in January 2015. Appen’s stellar year was highlighted by a key contract renewal from one of its major customers, Microsoft, across a range of Appen products and services to improve interaction between humans and computers. The linguistic data leader was also able to obtain a significant contract renewal with its largest social media customer (speculated to be Facebook) and contract win with the ‘largest global photo sharing platform’ (speculated to be Instagram). Speech interaction technology can be found in many facets of mainstream devices ranging from smartphones to cars, which creates a market for language data specialists like Appen to help improve performance and decrease error rates with a technology that is being used more and more in society. With a fundamentally strong balance sheet of zero debt, 29% return on equity, Appen looks attractive. Key contract renewals as well as new contract wins are imperative to continue its strong momentum in 2017. Coming off a strong earnings report in 2016 where they affirmed their revenue target of $200 million by 2020, Altium (ALU.AX) has proven to be a leading electronic Printed Circuit Board software provider,

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and its market share has continued to grow. The applications of Altium’s products are diverse, ranging from automobiles and aerospace to mobile devices and computers. Its customer base has continued to grow due to its attractive product offering and include the likes of NASA, Microsoft, Bose, BMW, and AUDI. Altium also have diversified earnings with 48% from the Americas, 32% from Europe, 14% from Emerging Markets and 7% from Asia Pacific. A strong balance sheet of zero debt, growing EBIT and revenue further improves Altium’s investment case. Fresh off a $100 million equity raising to fund the acquisition of XOS Technologies and PLAYERTEK, Catapult (CAT.AX) had a very eventful 2016. It is a company that provides wearable athlete tracking technology, which allows sport teams, coaches and players to monitor and optimize athlete performance. Catapult boasts a marquee roster of clients across a range of sports including NFL, NBA, EPL, AFL, NRL to name a few. XOS Technologies specialises in digital and video analytics while PLAYERTEK provides wearable analytics software solutions for the prosumer market. 2017 will be an interesting year for Catapult. One of the key factors to their success would be how effectively they capitalise on synergies and cross-sell opportunities with their newly acquired businesses. A potential catalyst for future growth would be the level of market share they are able to obtain in the large North American college sports market. Although not quite at the level of the NASDAQ, the ASX still offers opportunity in the tech sector. It is important to look at how large the addressable market is for each opportunity and conduct qualitative analysis on management and how the industry is trending. With a push in recent times towards reviving the Australian tech sector and nurturing homegrown talent in the space, we can be hopeful for more unicorns (private tech companies with valuation of $1 billion or more) to find a place on our ASX in the near future. This content has been prepared without taking into consideration any individual’s particular objectives, financial situation and needs. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances. BFM www.businessfirstmagazine.com.au

INVESTMENT FEATURE| BFM

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BFM | INVESTMENT FEATURE

WILL THE PRECIOUS BULL MARKET CONTINUE Nothing beats performance for anyone in our industry. No matter how well liked or disliked, anyone in the investing industry is judged by PERFORMANCE writes David Morgan of the Morgan Report.

aking stock selections is a tough business and market timing is even tougher. This does not deter us, however, and we will share our views for 2017 by looking back at January 2016. We highly suggest that all readers take a look at our “picks” against an index, to verify just how well we did or did not perform with our analyses. And, yes, the January 2017 Morgan Report will continue to bring you investment ideas to help you preserve and build wealth. Here is a partial look into last year’s January 2016 issue: Every year we list our top picks that we expect will outperform over the following 12-to-18 months. We typically choose two to four from each category: Toptier, Mid-tier and Speculation. If you had put an equal dollar amount into each pick, you would have ended the year up 99%. While this is an excellent rate of return over a 12-month time-period, 2016 was a wild ride for precious metals and especially the mining stocks. If you had the ability to get out of each position at its 52-week high, you would have returned 228%. While this is unrealistic, had you listened to David Morgan’s call for a medium-term top, and sold your trading positions, you would have booked a realized gain of roughly 190%. We will provide some of these picks and why we chose them, as well as listing the worst performing. Senior Producers. First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE): This was a no brainer given the market valuation of the company, starting the year out at just $3.42/share. It has an excellent management team and a very lucrative asset base driven by low cost production, even though it didn’t engage in what most primary silver miners did; high-grading. In fact, First Majestic “low-graded” select assets such that it could mine higher grades when silver prices rise. The typical silver company doesn’t have the luxury of being able to do this. Costs were lower year-on-year for many reasons including the 2015 acquisition of Santa Elena, which First Majestic was able to mine more profitably, as well an identifying the potential for future expansion. Going forward, the company will realize capital investments made into existing assets after starving them of

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capital during the 2012–2015 bear market. This will be illustrated through higher output at existing operations in the second half of 2017, to the first half of 2018. Mid-Tier Producers. Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT): The operator of the highest-grade gold mine in the world (Fire-Creek) had a lot to offer in terms of upside potential coupled with a valuation discrepancy. Klondex began the year just under $2/ share, and lagged the mining complex for essentially the first seven months of the year and then began to outperform. This was driven by several elements—the bid for and subsequent acquisition of the high-grade Hollister mine, first production from True North tailings reprocessing and a prefeasibility study of a full scale True North operation and a positive production decision. Organic growth from Fire-Creek, Midas and True North should support growth through the end of the decade, complemented by additional growth from Hollister, which could begin operating in 2017 as the Midas mill has excess capacity from which it can process material from Hollister. “Organic growth from Fire-Creek, Midas and True North should support Klondex Mines Ltd.’s growth through the end of the decade.” Speculation. Santacruz Silver Mining Ltd. (SCZ:TSX.V; SZSMF:OTCQX; 1SZ:FSE): This was a very speculative and risky pick at the start of 2016 given its debt-laden balance sheet but like all investments, especially in this sector, it is all about management. It had over $20 million in debt at the start of the year, the majority coming due within the next 12 months. Its management team led by Arturo Prestamo was able to amend its debt obligations through a combination of paying some down through raising capital, a portion being forgiven and a portion amended into a much smaller note due in quarterly installments beginning in H2/17. Aside from that, Santacruz had acquired the rights (for a period of 15 years) to mine the formerly producing Veta Grande mine in Mexico, which is now its cornerstone asset, complemented by the Rosario mine and mill and the Cinco Estrellas mine (mined material has begun to be trucked to the Rosario mill, www.businessfirstmagazine.com.au

INVESTMENT FEATURE| BFM

given that it has 300+ tons per day (300+ tpd) excess capacity). While the majority of our top picks outperformed the HUI (NYSE Arca Gold BUGS Index) or related benchmarks, we did manage to pick some underperformers, the most notable being Goldcorp Inc. (G:TSX; GG:NYSE). The company had some small hiccups in the first half of the year with operations remaining fairly steady over this time, but this was enough to cause its stock price to lag related benchmarks. 2017 Outlook and a Top Pick for You Last year I was optimistic that we would see a rise into the first few months, as things appeared better my caution remained as gold was leading silver. This was confirmed because the gold/silver ratio was not confirming the move. Finally, silver came on with a vengeance with the shares leading the way. However, with the recent sell-off to some, it feels like the entire precious metals complex is similar to the Greek myth of Sisyphus where the sinner is condemned to an eternity of rolling a boulder uphill then watching it roll back down again. At this point we are convinced we still are in a bull market even though we are well aware of the Harry Dents and Martin Armstrongs letting everyone know gold is going lower. In a bull market there will be some severe shakeouts to convince people they should not be in the market, and that is what we are experiencing now. If the gold/silver ratio were to move above 80 and gold were to trade below US$1050, we would reexamine our view. At this point we think most of the damage is done and we can expect a first-quarter rally that may not begin until late January or February. Since we still affirm that the bull market is intact, it makes sense to us to trade a portion of our holdings as market conditions warrant. We did make our call and sold into strength, taking some gains off the table. Those gains have been gathering dust, staying in cash for now, with the plan to buy in over the next four to six weeks. We understand that position trading is not for everyone, but it does give one some advantages to see that boulder roll back down the hill AFTER taking some profits. We don’t often provide our research to the public for free, after all it is how we make a living. Yet let us give you a speculation, Prophecy Development Corp. (PCY:TSX). This company has been on our list a long time staring as Prophecy Coal, and the company spun out the Wellgreen PGM mine for free to shareholders, very similar to one of our current holdings. The PGM company went straight up for a short time increasing many multiples. Prophecy Development has two very attractive development projects in Bolivia in Pulacayo and Paca. Pulacayo has had already seen significant capital investment in recent years as it was held by Apogee, which was overextended when precious metal prices entered the bear market from 2012–2015, and in turn sold these projects to Prophecy. Prophecy is looking to commence small-scale production (200 tpd at Paca and 100 tpd at Pulacayo) sometime in the spring or summer. Both deposits are very high grade with Pulacayo (underground) having a resource with silver and silver equivalent grades of 530 grams per tonne (530 g/t) and 688 g/t and Paca (openwww.businessfirstmagazine.com.au

pit) having a resource with silver and silver equivalent grades of 363 g/t and 444 g/t. Initial production should see total production of roughly 700,000 oz silver (annualized), however, this has the potential to increase and increase very significantly moving forward. In particular, we view the scalability at Pulacayo to be tremendous, making Prophecy a very exciting company to watch for years to come. The biggest drawback for investors is the fact that its silver assets are located in Bolivia and while this is a risk, we do believe the “Bolivian discount” is overdone and with recent history regarding asset nationalisation has primarily been on early-stage projects which haven’t been permitted. Even so, we categorize a company such as Prophecy as a speculation for a reason. Further, Prophecy isn’t a single asset, single country company as it also owns two significant coal assets including Ulaan Ovoo (with the significant rise in thermal coal prices over the last year, Prophecy is discussing whether to bring it back into production as early as this year), located in Mongolia and 17km away from the Russian border and the Chandgana power plant development project, also in Mongolia. Lastly, Prophecy owns an exploration stage titaniumvanadium-iron project in Ontario, Canada. A Speculation where our hands are tied Let’s face the facts. There is a lot of competition in the resource sector to deliver, which means large capital gains count! We have a trifecta of speculations that seem to line up at the start of this year, and we can only hint at one, because we make our living through the paid research we do for you in the paid Member’s Only section of the website. We have a speculative company that will be voting on a spin-off company that could be a leader in the electronic waste field. We are not allowed to mention much more because of legal restrictions that require all information be in the public domain at the time we publish. When/if this company “changes the path of the mining industry itself” remember you read it exclusively in Streetwise Reports. The Morgan Report not only keeps an eye on the obvious mining sector investment pearls, but, in addition, doesn’t hesitate to cast its analytical net far and wide in hopes of unearthing an investment gem that not only might “rewrite” our subscribers’ portfolios, but that could even change the path of the mining industry itself. BFM David Morgan is a widely recognized analyst in the precious metals industry; he consults for hedge funds, mining companies, depositories and individual investors. He is the publisher of The Morgan Report, author of the book The Silver Manifesto, and a featured speaker at investment conferences in North America. This article has been provided by Streetwise Reports: streetwisereports.com

The information in this article does not take into consideration any individual’s particular objectives, financial situation and needs. It does not constitute formal advice. Consider the appropriateness of the information in regards to your personal circumstances.

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BFM | PROFILE

Simon Madder

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PROFILE| BFM

Prime’s Three Pillars put Clients in a Better Place Like many young men in their teens, Simon Madder didn’t really know what he wanted to do as a career. His father Peter was a successful chartered accountant with his own firm and there was the opportunity to go to work with him. Author: Grant Titmus

t 16 he was a top state tennis junior and Madder thought being a professional tennis player might be an option. After finishing his VCE at the prestigious Melbourne private school Carey Grammar, he went to La Trobe University to study commerce. Life was on track. However, just six months into his commerce degree the prospect of becoming a professional tennis player was too much so he decided to give it one last chance. He went to the US and Europe and also had a stint at the John Newcombe tennis ranch in Texas. He even considered accepting a tennis scholarship to a US college. Yet after a few months struggling on the circuit “I figured I wasn’t going to be a world beater and tennis was great but it wasn’t something that I really loved. “So there I was. I had quit trying to be a tennis professional and had quit six months into my commerce degree. I had never really wanted for anything but had nothing.” Fast forward to today and Madder, 41, is Managing Director of the Prime Financial Group, an ASX-listed company with a market capitalisation of $25 million specialising in accounting and wealth management. It advises over $1 billion in client funds and, uniquely, has joint venture partnerships with 35 accounting firms of various sizes around the country. So what changed in Madder’s www.businessfirstmagazine.com.au

life? “After coming back from overseas I realised it was time to buckle down and make something of my life.” He went back to La Trobe Uni and finished a three year commerce degree in 19 months. During this time he also worked part-time in his father’s accounting firm. Part time work turned to full time “but it got towards the end of the year and I said to my father that I didn’t really want to be an accountant. I wanted to do something I found more interesting. “My father said he had an idea that he had been thinking about for some time which was to get accountants involved in wealth management. He thought it strange that we had all these clients but then handed them over to someone else when they wanted financial advice about how to invest their money and plan for retirement.” That was in December 1997. In January 1998 Simon, then aged 23, and his father set up Prime Financial to help accountants deliver more than just accounting services to its clients. “The early stages were hard. We were pretty close to running out of capital a couple of times but we knew we had a model that could be successful.” Two early foundation investors helped kick start the business. Looking to raise $4.5 million in capital, one-third came from

Madder family interests, one-third from well-known businessman and thoroughbred horse owner Lloyd Williams and one-third from another prominent Melbourne family – all clients of Peter Madder’s accounting firm. The vision of the Madders in the late 1990s was to create a business whereby they could enable accountants to offer their clients accounting and wealth management. In more recent times it has added capital advice to provide its clients with what is literally an end-to-end solution. “We confide a lot of information with our accountant. That is why consumers have probably less than a handful of accountants they use during their lifetime. “We needed to offer something different in what is a pretty cluttered marketplace. What we have done is to bring together the accountant and wealth manager to personalise and sync our advice so the client receives a complete solution.” Part of the Madders’ strategy was to get other accounting firms involved in offering these expanded services. To this end, Prime has joint venture partnerships with 35 accounting firms around the country. “This enables us to drive a lot more value through insight and expertise to grow accounting firms by giving them access to additional expertise as well as investing capital into

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BFM | PROFILE

their firm,” Simon said. In 2016, Prime Financial took this one step further by increasing its stake in Melbourne-based accounting and business advisory firm MPR from the 40% it acquired in December 2015 to a 93% stake in August 2016. Simon said the reason for increasing the stake in MPR was because it offered something unique. “MPR’s focus is on supporting businesses beyond accounting and business advisory with a focus on research and development grants and innovation for growth-

“Partnering with like-minded accounting firms enabled Prime to add significant value firstly by assisting them to offer a larger range of services such as wealth management, but also investing capital into the accounting firm along with the advice and expertise a larger group can provide.”

Simon Madder (right) with his father and business partner Peter

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orientated businesses. It has helped hundreds of Australian businesses access much-needed R&D grants (cash from the government) which have fasttracked their development. Simon said partnering with like-minded accounting firms enabled Prime to add significant value firstly by assisting them to offer a larger range of services such as wealth management, but also investing capital into the accounting firm along with the advice and expertise a larger group can provide. “The firms that we have chosen to partner with are all different but with one common philosophy – that clients are best served by receiving accounting and wealth management through one experience. Some firms are very growth oriented, some need to address a succession planning issue, some need to focus on the wealth management piece, and don’t have the skills or expertise to put that into place. We are in the unique position to bring it all together, and help the firm achieve their vision, their goals and their objectives. “For our clients it means we are able to offer a variety of services including wealth management and superannuation advice, business and personal planning, management and accounting, protection for business and personal capital and access to capital for growth and innovation. “This is much more than a traditional accounting firm offers. We deal with innovation on a daily basis and need to demonstrate innovation ourselves! One of our mottos is aspire, innovate and grow – and we need to live this every day.” The addition of the MPR business, which is being merged into Prime, adds complementary services for Prime accounting partners and clients and includes just over 30 employees and will see MPR rebranded as Prime. As part of the deal, MPR Managing Partner Matt Murphy joins Prime Financial’s leadership team adding important additional expertise.

“We now have expertise in grants, innovation consulting and capital advisory – expertise which our JV partners are now able to access to grow their business but also the business of their clients.” In January 2007, Simon’s father Peter joined the business on a more permanent basis. Today, Peter is an Executive Director and Chief Financial Officer. “While I might have come up with the Prime business model, it was Simon who took over the running of the company from day one. Simon built the business. I basically got out of the way although obviously provided advice and guidance as he was only 23, although a mature 23 at that! He is still only young but he has experienced a lot in the past 20 years running his own business and the ups and downs that it has had. “Today Simon focuses on growing the company and doing the deals and I tend to do the background stuff.” Peter said he believes Prime is in a great position to grow. “The whole industry is going through a transition – primarily rationalising. Margins are tighter and the operating costs of operating a business need to come down. “We have a clear plan of where we are heading – and that includes additional partnerships. Increasing our stake in MPR made complete sense. It has a great business model and together we will be better than two single entities. “Undertaking acquisitions makes sense as growing organically can be slow but any future investment we make must be complementary to our business plan. Because the industry is changing and the way we do business is changing, scale is important. “We believe in our business model and we know it is in the category of best practice.” While Simon and Peter have been with Prime from the start, staff retention has also been pretty phenomenal in an industry where retention can often be difficult. “One of our first employees was Danny Bowe, who is still with the firm 16 years later. There are several other team members well into the teens in regards to years of service,” says Simon. www.businessfirstmagazine.com.au

PROFILE| BFM

Simon Madder (centre) with staff Jonathan Bayes, the Chief Investment Officer (left) and Mark Johnson, who is Director – Private Clients

“We have tried to create an environment where people can thrive, but we can do better. We are given a lot of responsibility by our clients to look after their affairs – and we greatly respect that responsibility.” Simon says Prime does not intend to rest on its laurels even though it is successful. “You are constantly pushing yourself and your team to be better. You don’t really stop. Sometimes I will get up at 4am because I have thought of something and want to capture it. On weekends I am constantly thinking about the business and the direction it is heading. Sometimes it is second-guessing yourself but in the end there is a team in place, both from a group and board level, that I know can take the business forward. “It is vitally important that we stay ahead of the curve. We want to build something that is different, innovative and has the client as the centre of our considerations. Fortunately, no one has to push the senior people. They are their own worst enemy in wanting to do better for clients, themselves and for the firm. “I started my career as an accountant and I have had the privilege of growing up around accountants and seeing how highly regarded my father is held by his clients. They are a member of the family. Accountants and financial advisers are in a privileged position and clients need to feel comfortable that we aren’t prostituting them www.businessfirstmagazine.com.au

“There is an opportunity today to be more dynamic and that is why when we look at other businesses to acquire or partner with we want to make sure they are continually moving forward and not just doing what they were last year or the year before.” just for another buck. They are their most trusted advisors. “There is an opportunity today to be more dynamic and that is why when we look at other businesses to acquire or partner with we want to make sure they are continually moving forward and not just doing what they were last year or the year before. Accounting, and to an extent wealth management, can be seen as solid, staid professions but that is not what I would say about the people around me. There is an opportunity today to be more dynamic and embrace the needs of business owners and family groups. Simon said that the way Prime is structured is to provide a group

of services to get its clients into a better place. “It is not about being a jack of all trades and master of none. This is about providing expertise across our three pillars – accounting, wealth management and capital – with the ultimate goal of improving peoples’ livelihood. “Our growth plan is to ensure every business that we have a joint venture with is growing and delivering on the client promise. That is a non negotiable from my perspective. If you standstill for too long you can become irrelevant very quickly. “Our aim is to be more innovative – we want to know what our business is going to look like in 3 or 4 years time. We are investing in people and technology. No advisory firm in the future can be successful if it is not people, client and technology led. There is science behind our marketing for example – we need to know where and when to be investing our time.” Simon is also adding to his own knowledge and last year was part of a group of 10 MDs that went on a global innovation tour that included tours of US financial services and consulting firms, technology companies, creative and design agencies and firms such as LinkedIn. “The aim was to see how these companies were looking to the future and how they would get there. I found it a great way to stretch my mind because these companies are testing the boundaries – which is what we want to be able to replicate.” BFM

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BFM | WEALTH

WEALTH TRANSFER – EVEN BEFORE DEATH  Whilst having a well-considered and properly drawn up Estate Plan is a necessity for everyone with assets serious about achieving the best outcomes for their family, you don’t have to wait until you die before distributing your wealth writes Genene Wilson, Senior Financial Planner Omniwealth.

ou may decide to pass on your wealth while you’re alive, but such a strategy should always be carefully considered and is dependent on your individual circumstances. Australians’ median age is rising, therefore, longevity is an important consideration. Will you have enough capital and income to sustain you throughout your lifetime and have sufficient remaining to pass on the desired legacy/ies. Consider, if you live longer, and your medical and aged care costs are higher than anticipated, how will you fund your ongoing living expenses, and whether you can afford to pass on your assets while you are alive. RELOCATING TO AN AGED CARE FACILITY Recently, a client and her husband relocated to aged care homes. In this particular case the client had remarried later in life and both she and her husband had grown children. Sadly, a short time later my client’s husband passed away; and at that time the marital home that was owned as tenants in common was sold and she received her share of sale proceeds. As my client is a self-funded retiree paying “full freight” for her accommodation and care costs, she has decided that after setting aside enough for her needs during her lifetime, she will pass on her remaining assets now whilst she is alive. She intends to pass the cash from the sale of the home and the sale of her share portfolio to her four children. If you do decide to give away assets inter vivos and you are the

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recipient of Centrelink or Veterans Affairs pensions (or likely to be), then gifting your assets above established limits will mean that deprivation rules are applied to any benefits received. That means, those assets are counted as belonging to you and this may negatively affect your pension and aged care entitlements. The timeframe for deprivation is five years. In some circumstances, beneficiaries may be ‘at risk’ and in that case your asset protection strategy may be to pass those assets into a Trust. There may also be costs involved in the transfer, such as capital gains tax and stamp duty. You should also consider the tax and other implications for the beneficiaries of your gift. Make sure you speak to your Solicitor, tax adviser, accountant and/or Centrelink before making any decisions. Generally, key steps in deciding on an inter vivos intergenerational wealth transfer (in other words giving away your assets whilst you are living) include determining that your needs can be adequately met in your lifetime, open communication amongst family and possible beneficiaries, determining what assets will be transferred at what time and to whom and any structures that may be required. Ensuring your estate plan is relevant and up to date and the use of testamentary trusts if required remain important. WANTING TO HELP THE KIDS Another Omniwealth client who

is widowed, retired and living comfortably yet modestly on the coast in a caravan, enjoying the sun, sustained by her superannuation pension, also wanted to help out the kids. In this case the client has substantial assets well beyond what she believed she needs in her lifetime and therefore came to us for advice on how to have a sustainable income stream yet pass on assets in the most efficient way possible. The client has three children and two investment properties that two of the children were living in. The outcome of the advice was to assist two of the children to purchase those properties using a combination of vendor and bank finance; and with the capital raised provide a loan to the third child to purchase a home. In this case, the children would not have otherwise been able to purchase homes for many years requiring substantial savings for deposits, the vendor loans provided an income stream to our client; and upon her death the outstanding balance on the loans is to be gifted to the respective child. CONCLUSION The benefit of a sound plan to transfer your wealth is that the assets pass to the desired beneficiary in a way that protects their ultimate financial interest. If substantial assets are to be transferred, either in your lifetime or after, it is important to ensure that the custodians of that wealth (you have spent a lifetime building) can manage it effectively and enduringly for their benefit and your future generations. BFM www.businessfirstmagazine.com.au

WEALTH| BFM

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BFM | TAX

WHY CONTRACTORS ARE YOUR BIGGEST TAX RISK Many company directors are unaware that they could be personally liable for unpaid superannuation payments for contractors and are potentially easy targets for the Australian Taxation Office (ATO). Tax specialist Murray Howlett explores why contractors can be kryptonite to business owners.

imited liability has been an important building block of the western world’s commercial system since its introduction in the UK in 1855. Because of limited liability, entrepreneurs have had the freedom to take risks and build successful businesses. If the risks didn’t pay off, then their liabilities were limited only to the amount unpaid on their shares (normally, nil). For this reason the company structure has long been the ‘superhero’ of legal structures.

WHAT HAS CHANGED? In recent times governments and regulators have grown increasingly concerned about businesses taking advantage of this protection. In particular, they are worried to inhibit so called phoenix activities, whereby business operators run their affairs with no intention of paying debts and relying upon limited liability to shortchange their creditors. The creditors usually being employees and the ATO. Companies employing this strategy are essentially using limited liability as a ‘get out of jail free card.’ The rise of phoenix activity has forced the government and regulators to take action to protect employees and creditors. As a result, it has introduced laws that now pierce the corporate veil.

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TAX| BFM

THE HIDDEN LEGAL TRAPDOORS Although they have been in effect for some time, Director Penalty Notices (DPNs) are one of the most powerful weapons wielded by the ATO. A DPN will force a company to take action for any unpaid:

• Tax withholdings from employee wages (PAYGW); and • Compulsory superannuation. The DPN works by putting directors on notice that they will be personally liable for these debts unless they take prescribed actions. The DPN’s Achilles’ heel is that it may only be used to chase payments of known debts. If the company is not telling the ATO that it owes money, for example, by not lodging activity statements, then it can essentially fly under the radar. Because of this, the ATO added an extra layer to these laws. This extra layer operates to make directors immediately personally liable for any PAYGW and employee superannuation that remains unpaid and where the existence of the debt is not reported within three months of its due date. The big distinction being that this extra provision ensures directors are immediately personally liable for the debts due as opposed to merely being put on notice.

WHY CONTRACTORS ARE KRYPTONITE Under current Australian law if you hire an individual as a contractor who is to be paid wholly or principally for their labour, they are considered your employee for the purposes of superannuation. This is the case even if they’ve quoted an Australian Business Number or if you’ve agreed that their payment is to “include super”. If superannuation is not paid in these instances and if the ATO is not notified within three months of the due date, the director then becomes personally responsible. Any liabilities for unpaid super payments can easily go back many years not just the generally expected three or four year period. This means that directors are unable to hide behind complex company structures or family trusts from backdated claims. For example, if a contractor is paid $30,000 per annum, the employer has a $2,850 annual superannuation obligation. If that has been overlooked for a period of 10 years, the employer will find themselves personally owing $43,558 (the total amount includes interest and penalties). www.businessfirstmagazine.com.au www.businessfirstmagazine.com.au

ARE YOUR CONTRACTORS ELIGIBLE FOR SUPERANNUATION? The ATO will generally accept that contractors engaged through a proprietary limited company are not due superannuation. Ensuring that all contractors your business engages use companies is then the best defence. Alternatively, your contractors will only be liable for super if they are principally paid for their labour. In assessing this, the factors taken into account include: • The level of independence - who, when, where and how the work is performed; • Rates of pay and how they are negotiated; • Their appearance to the world at large - does it look like they represent the company? • My advice is that if your business deals with contractors then it is worth taking a look at their superannuation eligibility. The ATO has made it no secret that they are looking for revenue and it will be the first place they look. BFM Pilot Partners’ Tax Partner Murray Howlett has practiced as a professional business advisor since 1993. He is knowledgeable in all facets of federal tax and regularly consults on corporate tax, superannuation and international tax-related matters. An advocate for the taxpayer, he is regularly engaged by clients to manage the dialogue with the Australian Taxation Office (ATO) following tax audit and other investigations. Murray holds a Bachelor of Commerce, a Bachelor of Laws and is a Chartered Tax Advisor and Fellow of the Institute of Chartered Accountants in Australia. For more information on Pilot Partners please visit pilotpartners. com.au. DISCLAIMER: This publication contains general information only and is not intended to constitute financial advice. Any information provided or conclusions made, whether expressed or implied, do not take into account individual circumstances. It should not be relied upon as a substitute for professional advice.

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BFM | PROFILE

CHANGING THE WORLD —ONE ORGANISATION AT A TIME

Founded in the US in the 1970s, Human Synergistics works with companies to improve culture, develop leadership, create more effective teams and improve productivity. The company’s globally recognised approach to cultivating successful organisational management attracted Shaun McCarthy to the fold, who proceeded to open the first Asia Pacific branch in New Zealand. For 38 years Shaun has worked tirelessly to build on the company’s reputation throughout Australia and New Zealand. Business First speaks with Shaun about the growth of the business in Australia and how businesses can outperform the market by creating a constructive culture.

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PROFILE| BFM

Business First (BF): How would you define a successful organisational culture? Shaun McCarthy (SM): A successful organisation is one that achieves its goals, integrates its structure, people and systems and adapts well to changes in its external environment. As successful organisational culture is one that facilitates the organisations achievement of these. In short, a successful cultures is one that enables the organisation to effectively implement its strategy. BF: What is the key to building a successful culture? SM: The key to building a successful culture lies in firstly understanding exactly what organisational culture is (and isn’t), secondly being able to articulate what behaviours are currently being reinforced by structures, systems and leadership processes, and thirdly being constantly mindful of how any changes in structure, systems, leadership and communications systems will impact on the current culture. BF: What signs negative or positive do you look for when you go into a workplace? SM: Human Synergistics actually measures the organisations culture. Based on sound research, we can survey the people within the organisation to learn how they believe they are expected to approach their jobs and interact with each other in order to fit in, get ahead, and in some organisations simply survive. Then based on applied research regarding the impact of culture on performance, we can help the organisation leaders learn how the current culture facilitates and inhibits performance potential. BF: How do you decide what needs to be done once you’re in? SM: Again, based on 30 years of research, particularly that of Dr Robert A Cooke, the survey process identifies exactly what is causing the culture to be as it is and what needs to be done to improve it. BF: How do you get everyone on board? SM: Commitment is the key. www.businessfirstmagazine.com.au

Shaun McCarthy, Chairman of Human Synergistics Australia & New Zealand

Change or improvement does not happen without people being committed to achieving some goal. Effective change is about learning. People don’t change by being told what to do. They change by learning that there may be a different way to achieve greater results. We therefore apply the principles of adult learning – that adults learn best when they have the opportunity to enquire into the information and form the conclusions for themselves. So we don’t just present data – we work with leadership groups to help them learn what the data means for

them and to help them come up with ideas for improvement. BF: You talk about a culture of innovation, what do you mean by this? SM: With digital disruption and rapid change, everyone is talking about the importance of innovation. So a ‘culture for innovation’ is top of mind for many senior executives right now. But what many fail to understand so that innovation is an end result of having in place a number of organisational conditions that allow innovation to happen. So rather than simply attempting to

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BFM | PROFILE

Darren Levy, Human Synergistics Facilitator

“Innovation is a term that must be seen as being relative to the organisation. What might be innovative for a Government department may not be innovative for an FMCG. But for them it’s innovative” ‘be more innovative’, organisations need to examine their internal systems to see if they will support innovation. For instance – an element of job design is autonomy. If jobs within an organisation are low in autonomy, then the message (culture) people take from such job design is that they are not required to ‘think’, they are simply required to ‘do’. Then if the organisation gives them the message that “we need to be

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more innovative”, the actual job design does not support people being able to do this. Then senior management will moan about people not ‘taking responsibility’ or ‘being accountable’ or ‘not using their initiative’. This will be followed by training or some other initiative, as management see this as a ‘people’ issue, rather than a ‘systems’ issue. Another common example is inter-departmental coordination. Most senior executives would admit that ‘silos’ exist in their organisation. If work is not well coordinated throughout the organisation, this will limit the ability to innovate. Essentially the right hand doesn’t know what the left hand is doing. So if the organisation does manage to innovate with a new product or enhancement to an existing product, it is highly likely that there will be performance issues with the product as the part developed by the right hand may

not ‘talk to’ the part developed by the left hand. There are so many examples of this there have been whole books written about it. BF: How do you define what is innovative for each organisation? SM: Innovation is a term that must be seen as being relative to the organisation. What might be innovative for a Government department may not be innovative for an FMCG. But for them it’s innovative. The key lies in one of the elements of a successful organisation I mentioned earlier. Every organisation needs to be able to adapt to changes in its external operating environment. Being able to adapt to change is what is commonly referred to as ‘innovation’. Any organisation that does not adapt will not last. BF: There are many companies that do what you do, how do you set yourself apart, what is your difference? www.businessfirstmagazine.com.au

PROFILE| BFM

SM: I believe what genuinely sets us apart is the depth of the research behind our measurement tools and our consulting approach. Human Synergistics, through Dr Robert A Cooke and the Human Synergistics Center for Applied Research has been researching leadership and culture for over 30 years. This has resulted in a number of different leadership feedback tools and the organisational culture survey which is the most used culture survey in the world. When providing measurement tools it is absolutely essential that these tools are accurate and meaningful. The fact that these tools have been published in over 75 different academic journals, reports and articles and are used by around 2,500 organisations in Australia and New Zealand is a credit to the way in which these tools can help organisations address the real issues they need to address in order to improve organisation performance. BF: How do you apply psychology to what you do? SM: Organisational behaviour and organisational development are based in the human sciences of psychology and sociology. How people think and behave and how organisational systems reinforce certain behaviours are fundamental. BF: What do you put the company’s longevity down to? SM: The depth and breadth of the research underlying what we do. Human Synergistics had been operating in the US now for over 40 years and our business has been going for nearly 40 years in New Zealand and nearly 30 years in Australia. BF: How has the practise evolved? SM: Human Synergistics began as a consulting business. In 1990 we developed the accreditation system whereby we train other consultants and HR/OD professional inside organisations to use our tools and approach. We provide extensive training and ongoing professional development to these accredited practitioners and they now form www.businessfirstmagazine.com.au

“Multinational organisations want to be global organisations. They want much more consistency around the world in how they operate and standardization of HR/OD practices. So for us, that means global projects involving multiple languages and many other challenges” the basis of our growth throughout the world. In Australia alone we have over 2,000 accredited practitioners, providing us with a very large reach for our tools and an enormous amount of data for ongoing research. BF: It has international reach, what does this mean for the business? SM: That the world has become very small has gone beyond cliché. It has become very real. Multinational organisations want to be global organisations. They want much more consistency around the world in how they operate and standardization of HR/OD practices. So for us, that means global projects involving multiple languages and many other challenges. It’s also exciting seeing some of the ‘newer economies’ jumping straight into approaches that we have taken years to learn. BF: Do you find businesses have similar requirements around the world? SM: Yes we do. The issues are always about adaptation to external change and integration of the organisations people, structures, systems and leadership. We find ourselves having the same conversations in Sydney as we do in Chicago, London, Budapest, Beijing or any other city in any part of the world. BF: Where will growth come for you? SM: Growth will be both organic and developmental. There’s still plenty of market out there for our existing tools and consulting approaches and we will always

be looking at how we can develop more tools on the basis of the ongoing research that we do. BF: What does the next 5 to 10 years look like? SM: Lots of technological innovation in the measurement and survey business and increasing competition within all of our markets. That simply mean we need to continuously concentrate on providing excellent service to our clients and looking at ways in which we can innovate our own business. Leadership will always be there and organisational culture has become very topical. Our next adventure is into measuring and providing real-time feedback on group and team performance. BF: What have been your biggest achievements in the role? SM: The achievements have been extraordinary. As an organisation we help change peoples’ lives. It is incredibly exciting when you bump into an individual who has gone through one of our individual leadership feedback processes and they tell you who that changed their life. Or seeing an organisation leap ahead in performance as a result of making some changes to their culture. That’s why our mission statement is: “Changing the World— One Organisation at a Time”. BF: What more do you hope to achieve? SM:I love what I do so I hope I can keep on doing it for a long time yet. I have some fantastic people around me and it’s great to see those people grow and expand their capabilities. BFM

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BFM | BUSINESS

Five performance standards that could be hurting your business Every business strives to do better. Increasing sales, reducing costs, and gaining market are just a few of the standards companies use to gauge their success. The problem is that using these standards as measures of success can sometimes lead to shortsighted decisions that do more harm than good. So here are five performance standards that could be hurting your business if used as key influencers. 1. Time and efficiency. Many companies measure the effectiveness of customer interactions by time. Speaking to more customers in less time is the goal. This is especially true when it comes to customer service departments. Instead, train your staff to make sure every question is answered and problem solved, regardless of how long it takes. In the long run customer satisfaction will increase while repeat calls will drop. 2. Queues and wait times. Some businesses such as restaurants or nightclubs welcome and even encourage long lines, believing it makes the establishment appear more enticing to those passing by. The problem is that those forced to stand in long lines will be unhappy customers before theyâ&#x20AC;&#x2122;ve even made a purchase, reducing their chance of returning. Instead focus on creating a great experience as soon as they arrive. That may mean shorter lines or finding a way to turn waiting into a positive experience in itself. 3. Cutting costs. When times are tough, the first expenditures to get cut are usually marketing, followed by customer service. However studies have shown that companies who maintain their investment in these areas often see less of a sales drop than their competitors who chose to reduce spending. These companies

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also experienced faster recoveries when the market picked up. 4. Your competition. Many business owners view success as a race. For them to win, their competitors must lose. The fact is that the only thing they should be trying to win is the hearts and minds of their customers. Worry less about the competition. Focus instead on putting energy and resources into providing great products, backed by awesome customer service. Doing that will be the best way to force your competitors to play catch-up.

5. Attracting more customers. Many businesses will regularly offer aggressive promotions for new customers - think phone companies and health clubs, but totally forget their current customers. According to the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. So while exclusive promotions for new customers are fine, itâ&#x20AC;&#x2122;s even more important to reward the loyalty of current ones. BFM Marc Gordon is a recognized marketing expert, speaker and strategist. His articles appear in over 200 publications worldwide. Visit marcgordon.ca or his online show at marctv.net for more business tips. www.businessfirstmagazine.com.au

BUSINESS| BFM

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BFM | LEADERSHIP

Should we forget the New Year’s resolution? Come 1 January and most of us feel pressure to make resolutions to improve something which, frankly, we usually weren’t any good at to begin with. “Take up playing the ukulele”; “Become a better cook”; “Improve my gardening” … By Giam Swiegers, CEO Aurecon

y 17 January, you’ve usually lost all momentum and once again regressed. If this sounds like you – please stop feeling guilty immediately. In fact, you should actually feel pretty smug. Focusing on what you aren’t good at is a waste of time at best. If you work on your strengths you might be brilliant; but if you work on your weaknesses, you may only ever be average. And who wants to be average at anything? DISCOVER YOUR STRENGTH Historically, we’ve been programmed to think that ‘good parenting’ is telling your children: “You can be anything you want to!”…or is it? Modern wisdom (and psychology) now seems to suggest the exact opposite. Well-known psychologist Dr Martin Seligman, who coined the phrase ‘Positive Psychology’, believes that for a person to be truly happy and live a life that is meaningful, you must understand what your personal strengths are in order to use these to reach your full potential. If we took Seligman’s advice, we’d spend far more time trying to uncover our personal strengths and not waste valuable time and effort on things that take us away from doing what we were made to do. When we focus on leveraging our natural talents, we play to our strengths and exhibit our greatest potential. Ever heard of the world’s best juggler? Mikhail Rudenko, born during the 1950s in remote Ukraine, had a passion for juggling and juggled professionally as well

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as taught the same. In 1978, he started to practice with 12 balls and achieved a personal best of 16 catches (each catch with two balls). The ‘official’ record for the most balls juggled was set by Alex Baron (11 balls) in 2012 – no one has been able to top Rudenko’s feat. Interesting, he has been quoted as regretting that he wasted his time and energy on juggling with other props and if he could start from the beginning again, would practice using only small balls. If someone had told him what he was doing was impossible and that the world record one day would be only eleven, I believe he would have replied “nobody told me it was impossible”. He had simply done what came naturally. DIVERSITY NOT CONSISTENCY Have you ever been part of a team that just doesn’t work despite the best efforts of everyone around the table? Or maybe you’ve experienced the opposite – a team able to deliver time and again with everyone ‘on the same page’ and consistently motivated. In the 1970s, management psychologist Dr Meredith Belbin discovered a way to predict the success of teams. His research involved business simulations which divided participants up according to their different psychological types – introverted/extroverted etc. During a five-year period he hypothesised that there are certain patterns or clusters of behaviour which predict team success and that individuals often have a preference for one or more of these clusters. Another discovery included that no one

team is ever perfect for every task. At the end of the study, he was able to accurately predict which teams would succeed at projects by analysing the strengths a group of individuals brought to a specific team engaged in a specific task. His analysis reinforces the fact that team success relies on interdependence and the right ‘mix’ of its members’ strengths . For industry, is this a clear call for change? Now more than ever, amid world volatility and seemingly insurmountable problems that include climate change and the growing health crisis, there’s a need for diversity of thought. We have had so many people that looked exactly like us running the world before and this hasn’t (yet) resulted in significant improvement. We need a radical shift away from what we’ve done before , if we want results that are different to what we’ve always achieved. Dr Ute Hülsheger, an Associate Professor of Work and Organisational Psychology at the Faculty of Psychology and Neuroscience at Maastricht University, is also a proponent for www.businessfirstmagazine.com.au

LEADERSHIP| BFM

a leader who isn’t intimidated by difference or uncomfortable with being challenged. Surrounding ourselves with those who always agree with us dramatically increases our likelihood of being wrong or failing.

diversity of thinking. She advocates for diversity in skills (job-relevant diversity) as a major contributor to innovation, although she does caution that careful thought and curation are required in terms of diversity of backgrounds on a team in order to achieve the diversity sweet spot. Interestingly, each one of the nine team roles Belbin formalised has what he calls an ‘allowable weakness’ – reinforcing the fact that we do not have to be good at everything all the time. We just have to be really good at what we are good at! There is great strength in the right mix of strengths. HIRE FOR YOUR WEAKNESS Some of the world’s best inventors were known to be weak at certain things. Mark Zuckerberg and Steve Jobs didn’t become famous for their tolerance of others. Yet weaknesses often make us uncomfortable and this tendency to want to be ‘perfect’ spills over into our leadership style. We look at weaknesses during annual performance appraisals and how to improve these. We come up with ‘development plans’ focused on www.businessfirstmagazine.com.au

improving our ‘blind spots’. In reality, we should be hiring for our weaknesses, not improving them. If you’re great at meeting with new clients to seal the deal but poor at the follow-up paperwork, you don’t need a course in administration. You need an effective personal assistant. If you’re a whizz at designing new processes but get bored with implementing them, you don’t need a course in follow through. You need a project manager. Going forward, companies who embrace a diverse workforce with complementary strengths will be better equipped to compete than those who demand conformity. BE PREPARED TO BE CHALLENGED Warren Bennis, an early pioneer in the field of leadership studies, wrote in his book ‘Co-Leaders’ that today’s world is complicated and that the days of solo leadership are gone. In other words – autocracies are out – teams of leaders are in. Bennis believes that in today’s complicated business environment, leaders who can combine the skills of their followers will progress. The prerequisite to this ability is

WHAT’S YOUR SIGNATURE? Richard Branson has made a career out of challenging the status quo. He infiltrates businesses that have become ‘lazy’ and brings unconventional thinking to business conundrums in order to awaken potential. He is good at competing and disrupts traditional thinkers in his space. His signature style is a ‘rebel brand’. Estée Lauder, of the cosmetic giant by the same name, built her success through sheer hard work and her signature ‘I don’t take no for an answer’ courage. “To sell a cream, you sold a dream,” said Lauder – and it was a dream she worked on in her tiny flat day in and day out, knocking on doors for hours on end to peddle her wares before securing contracts. She became famous for saying: “I never dreamed about success. I worked for it.” But what if you aren’t an Estee Lauder… a Branson… a Jobs… or a Zuckerberg? One of the nonnegotiable skills that leaders should have is an ability to manage outcomes – but let’s not forget: there are several thousand ways to get there. An authentic leader who has found their signature style and is focusing on their strengths is far more powerful than emulating tried and tested leadership principles. In 2017, isn’t it time we threw away the formulaic blueprint of leadership or what a successful employee ‘should’ look like? What businesses today need are leaders courageous enough to advocate for a diverse workforce who are unleashed to work on their strengths. Forget the New Year’s resolution and improving what might never be. Each of us has enough strengths to contribute to the table already – what’s yours? BFM Giam Swiegers is the Global CEO of Aurecon, a global engineering, management and specialist technical services company.

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BFM | PROFILE

THE SUM OF ALL PARTS With more than 400 makes and models of cars in Australia, the aftermarket parts, accessories and service sector is serious business.

hile some people may not be familiar with the Bapcor name, most would know the long list of retail, trade, independent, specialist and service outlets within the group. Commencing operation in Melbourne in 1971 as Burson Auto Parts, the business now supplies more than 500,000 different car parts per year around Australia. Darryl Abotomey joined Bapcor in 2011 as CEO, leading the company through an ASX listing in 2014 and its change in name from Burson Group Limited in 2016. The change in name, explains Darryl, was done to reflect the evolution of the group, particularly after the acquisition of Metcash’s automotive businesses in August of 2015. The Bapcor stable now includes such well-known names as Burson, Autobarn, Opposite Lock, Midas and ABS to name just a few, with supply arrangements and branding support to independents such as Autopro and Sprint Auto Parts. The growth of Bapcor – even before the acquisition – has been impressive and Darryl sees extensive future growth on the horizon. Plans for the next five years include expanding the Burson and Precision stores from approximately 147 to 200 outlets, raising the number of Autobarn stores from 115 to 200, and almost doubling the number of Opposite Lock outlets from 64 to 120. It’s a bold plan, but one that Darryl believes is possible due to the current strengths and culture of the company. “We’ve already experienced significant growth over the last 5 or so years and so we’re in a good place to continue,” he says. “The culture of the business and people is incredible and helps drive us all forward.” “The managers and staff in the stores all know each other pretty well. There is no politics in how they operate – they just want to get

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CEO Darryl Abotomey

things done. They want to help the customers – be it retail or trade – and they see how the organisation can support them to achieve that and work together.” This ethos is supported through an extensive incentive program, ensuring all staff have an active interest in the efficiency and credibility of the business. In the trade business alone, all people – from the salesman through to the store manager and on to the drivers – are all on some form of incentive. While there is clear direction from the top, Darryl works hard to ensure there is a personal touch, consistent with the philosophies of the family business. He still sits

down every week to write birthday cards for people in the original business and he makes himself available for phone calls from anyone. “We want all our people to feel like they are part of something successful and growing with a real presence and strength – yet we also want them to have a sense of ownership of their store with a personal connection to see it succeed at an individual level.” Although there is clear delineation between the retail and trade brands, there is still a strong focus on stocking quality brands throughout all outlets. As Darryl notes, most consumers would not know nor check what brands their www.businessfirstmagazine.com.au

PROFILE| BFM

DRIVING FUTURE SUCCESS.

NGK Spark Plugs have built a reputation for nurturing innovation, investing in quality and driving future success. Our team is committed to delivering a level of customer support that is often benchmarked, but rarely equalled.

ngk.com.au

BFM | PROFILE

mechanic uses when servicing their car; however the mechanic knows that a poorly performing part will reflect badly and so they require trusted brands as much as an informed consumer. It is an interesting example that mirrors Bapcor’s own approach to business. “Whether it be trade, retail or the service sector, a lot of business is from word-of-mouth. If we stock poor products or don’t provide the service, then we won’t survive. It’s in our interest for our customers to succeed, so we will work with them, and provide a service for them that supports their needs.” One such innovation for the trade sector is Bapcor’s ‘The Alliance Program’ which offers employment and legal advice, as well as website construction support and promotional items to workshops – mostly free of charge. “If they buy up to at a certain level, then they get the benefits of that level,” says Darryl. “A number

of customers came back and said, ‘What’s the catch?’, but there isn’t one. The whole aim is to make our customers more successful so they can grow their business. Our logic is if they grow their business we are going to get more sales, so it is a win for both.” Underpinning this connected approach is a strong relationship with suppliers, compounded by the nature of the car industry. “Every time a new motor vehicle comes out, there arenew parts for it. We have to work with our suppliers to make sure that not long after new models come out, they have the parts available for us. It’s the biggest single challenge we have working with our suppliers.” It takes a lot of energy and determination to run such a business, and Darryl’s passion towards Bapcor is obvious. He says that he will always be looking to develop and grow on the simple premise that “if you can’t improve your business, then you

know it’s time to retire.” “I have never enjoyed a job as much as I do this one, and I think you’d find that from the majority of the people in the business,” he says proudly. “We work with a good bunch of people with hardly any of the politics that you so often get in businesses. We get things done and in a manner which is respectful and fair to all.” Of course, a large part of the objectives – particularly for shareholders – will be reflected in the figures, and with strong financial growth over Darryl’s tenure, he wouldn’t appear to be leaving Bapcor anytime soon. “We’ve always met our targets, but I get a lot of satisfaction in what we’ve achieved since we floated in 2014. We see such a clear path ahead in what we are trying to achieve and where we want to go, so to see that come together whilst meeting financial and operational targets is personally gratifying, and a credit to all our staff.” BFM

FEATURE: EQ| BFM

EMOTIONAL INTELLIGENCE: The Emerging Key to Driving More Effective Sales Results Within most organisations sales management are well aware that the success rate of calls made to customers and prospects alike is at best modest and by extension the failure rate of sales calls made especially in trying to secure new business is alarming low.

n fact well over 90% of all selling effort fails to achieve its objectives where it is not uncommon that sales and business development people that have been calling on the same customers within a designated territory and who have been visiting them for years have never managed to make a single sale, take a single order or even alter the thinking about where the brand they represent fits in to the pecking order of brand preference. Despite this alarming information coming as no real surprise to any experience sales person, it certainly is hard to reconcile with the amount of effort and the level of resources that goes into training sales people from initial training to more advanced, consolidation training phases that typically occurs within 12 to 18 months of the representative joining the firm.

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This training generally ticks some important boxes including providing the trainee with high levels of product knowledge for the businesses own brands, detailed information on key rival brands, current sales trends that highlight prevailing behavioral norms and detailed customer analysis with high levels of key data from company structure, key decision makers and currently used brands. Beyond this there is usually also an adopted sales model in place which is often part of a global tool kit and made available through a parent head office internationally which provides a basic framework around which someone can build a discussion around and try to move someone from not using a product through the stages of awareness, interest and ultimately trial, where a comparative evaluation can be made against existing brand choices. So in short this is what sales people have and despite this the numbers are anything but flattering so the obvious question is what donâ&#x20AC;&#x2122;t they have that they need to make them more effective in a real world setting? Simply put the missing link for most sales people is not product information, territory management planning or even work rate. It is simply the skill to deliver their key messages and then through the use of concurrently applying the key principles of Emotional Intelligence, be able to identify and act on signals that are being given by the customer that are currently not being seen or understood and therefore represent missed opportunities in being able to not only build a strong working relationship with someone but be able to leverage that relationship to facilitate ongoing winwin outcomes that benefit both parties equally. These principles that have at their core both your own self-awareness and equally important, social awareness of others where you have an equally clear awareness of the needs and feelings of your customer. These represent the true starting point to genuine partnership and long term, sales success. For those that have been integrating these key emotional intelligence principles with their selling skills, you will not be surprised that the result is greatly enhanced performance as emotional intelligence has been show in research to be twice as powerful as IQ and technical skill combined as a predictor of future success. Perhaps nearly thirty years since the term Emotional Intelligence was first coined in 1990, it may be finally time for even the conservative world of sales to adopt a new strategic ally that can elevate it to new heights. BFM

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BFM | DIGITAL BUSINESS

BUSINESSES NEED TO COP THE BAD WITH THE GOOD In 2017, businesses will have a huge opportunity to build trust with their customers in a digital forum. More than ever, a digital footprint will determine the number of customers engaging with a business. Research conducted by True Local last year looking into consumer behaviour and use of review sites, showed that 9 in 10 people have used a review site in the last year. And, the majority claimed to read at least five reviews before making a purchase decision.

eview sites are just like word-of-mouth – local people seeking advice from others about a product or service, looking to be enlightened about what their experience might be like. Whether a business is online or offline, owners should be taking review sites seriously and monitoring the feedback posted by customers online about the products or services. Over the past 12 months, almost a third (29%) of Australians said their usage had increased. Reviews – negative or positive – enable businesses to reach new audiences, create a strong online reputation, and monitor consistent feedback to help improve a service or product. Embracing reviews can be a challenge for many businesses, with mixed messages on how to approach reviews or utilise the feedback as a tool to evolve the business. There is not an instruction manual for reviews, but sites like True Local work with millions of businesses each month and are able to provide guidance on how to handle negative reviews. Trust is the greatest asset a brand

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can build; it can take years to build and seconds to lose. Brands need to be willing to accept the bad with the good, and digest feedback from customers, using these external insights to grow the business. Negative reviews can be a good thing. The research also identified two thirds (66%) of Australians questioned the credibility of a business that only has positive reviews. Not everyone will have the same experience, and as with any business, people expect that there will be bad days. As responses are visible to both existing and potential customers, it’s always important to be conscious of the approach taken when replying to feedback. A customer usually takes the time to share feedback to improve the business and overall experience for other customers in the future. Businesses should be polite and professional at all times and outwardly show they understand the customer’s point of view. The worst thing a business can do is be defensive and suggest that the customer is in some way wrong. Avoiding an apology also won’t garner any respect from customers. When responding to negative

reviews, there are four crucial steps to take: 1. An introduction goes a long way – the person responding on behalf of a business should provide a name and business title to show customers that real people work there – this will make the process more personalised and conversational. 2. Thank the reviewer for providing feedback 3. Apologise to the customer for the fact that the experience didn’t meet their expectations. Acknowledge the issue and let the reviewer know the business will attempt to rectify the situation to ensure it doesn’t happen again in future. 4. Take it offline – to stop the issue from escalating in public, provide a direct email address so that the customer can email privately to discuss the matter further. In good news, Australians are www.businessfirstmagazine.com.au

DIGITAL BUSINESS| BFM

also open to forgiving and changing their opinion of a brand, provided appropriate steps have been taken when responding to a negative review online. A considered and empathetic response can go a long way, with 93% of Australians saying they feel more positively about a business that had responded to negative reviews in an attempt to solve the problem. Though, some businesses have reported suspicious reviews on a listing, under the impression that it has come from a competitor. In the event that a business suspects a competitor is writing fake negative reviews to deter customers from using their services, we advise that they contact the review site’s customer service to share their concern and ask for an investigation. If a business identifies multiple reviews with the same language used or the same experience www.businessfirstmagazine.com.au

referred to, or finds similar reviews posted within the same timeframe, it’s best to contact the host site moderation team and enquire about having the posts investigated. As a rule of thumb, these types of reviews should be treated with the same level of customer service and consideration as real negative reviews – offer a resolution and encourage the reviewer to take the matter offline. Businesses can overcome questions about the authenticity of reviews by building a presence on ratings and review sites that take the legitimacy of reviews very seriously. For example, True Local has a very stringent process when it comes to the reviews on the site. To leave a review on the website, consumers have to be a registered user. True Local also uses a combination of fraud monitoring technology and trained, human

moderation teams. The process of the anti-fraud technology includes up to 100 checks to make sure a review isn’t fake, looking to see whether it has come from a suspicious IP, or an email address that is associated with the business. A negative review online can be unsettling for many businesses. While there’s no doubt that having positive reviews will help to attract new consumers, the most important thing is not to be scared of a bad review. As the world becomes more digitally focused, businesses must adapt and change attitudes towards engaging with customers online. BFM Robert Tolliday is the general manager of online local business directory True Local, the go-to rate and review website used by millions of Australians to discover and experience all things local since 2006.

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BFM | PROFILE

In defence of Australian business The Australian defence sector is a diverse community of more than 25,000 people – with more than half of those employed locally by global defence companies and a further 3000 as subcontractors.

hile our military operatives defend our borders and keep the peace in unstable parts of the world, our homebased defence sector makes a substantial contribution to the Australian economy. Recognising its importance, the Turnbull government has announced $195 billion in defence acquisitions. In Victoria alone, the defence sector contributes up to $8 billion to the state’s economy. The industry comprises more than 300 businesses that directly employ up to7000 people who make equipment and provide services for defence activities. One person who knows a thing or two about defence and its value to the economy is Greg Combet, the former Minister for Defence Personnel, Materiel and Science in the Rudd and Gillard governments, has a deep understanding of defence and its value to the economy. Mr Combet is nine months into a 12 month contract as the defence industry advocate for the Victorian government.

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His role is to advocate on behalf of Victoria’s defence industry - nationally and internationally stimulating investment, boosting jobs, and helping to build the brand. “When I commenced my role, we identified a number of priorities, the first was to focus on securing Land 400,” he said. LAND 400 is a $14 to 20 billion project designed to provide the Australian Defence Force (ADF) with world class armoured fighting capability. Identified in the Department of Defence’s 2016 Integrated Investment Program, Land 400 Phase 2 of the project will deliver 225 Combat Reconnaissance Vehicles, with Phases 3 and 4 delivering Infantry Fighting Vehicles and training systems respectively. Companies tendering for Land 400 Phase 2 have been instructed to select their own production sites, leading to a competition between state governments in an attempt to attract investment and jobs. Mr Combet has been steering the Victorian government strategy. Central to this strategy is a

need to strengthen and diversify Victoria’s economy, particularly in light of the closure of auto manufacturers and energy suppliers. The defence industry is working to fill some of the gaps left by these companies. “When you think about the auto industry, Toyota, Holden and Ford, they have been big contributors to the Victorian economy over many years. However, their production volumes in Australia were too low to achieve success in a highly competitive global marketplace,” Mr Combet said. “The defence sector on the other hand is less vulnerable to global competition. This is an industry more than any other that depends on government decisions and tax payers money. National security considerations come into play and that means that the defence industry is one that is more aligned with public policy as opposed to global market movements. In other words, the defence industry enjoys a level of economic protection. “This is why defence projects attract the interest of state governments. In Victoria, we are especially keen to secure Land 400 to help offset the economic impact of the closure of the Toyota, Holden and Ford plants. In fact, with its long history of automotive and military vehicle manufacturing capability, we think that Victoria is a natural fit for Land 400.” Various regions in Victoria will be hard hit by the closure of the auto industry, including Geelong and the north of Melbourne around the Ford Broadmeadows plant. The Latrobe Valley in Victoria also has its eye on the potential of the defence industry as well, after the closure of the Hazelwood power station. Mr Combet said the defence industry supply chain is one of the state’s biggest strengths. “Victoria has a significant defence industry supply chain that www.businessfirstmagazine.com.au

PROFILE| BFM

is well organised and that has great manufacturing capability. We have got to leverage this strength to help meet the challenges in some of those regions in Victoria that have been hardest hit by industry transition.” While visiting the Latrobe Valley, Mr Combet has met with businesses, Federation University Australia, Latrobe City Council and the head of Defence Materials Technology Centre, Mark Hodge, to shed light on what it takes for a region to become a key player in supplying defence contracts. “I was in the Valley for two reasons; one, to get a better feel for the engineering capacity that a number of firms in the area have and secondly; to see if there’s a pathway for some of the local firms into defence industry supply chains,” Mr Combet said. Infrastructure is an important priority for Mr Combet and the Victorian government. Accordingly, the government purchased motoring giant General Motors Holden’s Fishermans Bend plant with the aim of transforming it into an innovation and employment hub. The vision for the site is to create Australia’s new home for design, engineering and technology to attract leaders in the areas of aerospace, defence, education, marine design and automotive design. Mr Combet says it makes sense for the defence industry to consider locating to this new hub because it is close to tremendous resources - such as research groups and higher learning institutions whose expertise can be leveraged. One of Mr Combet’s main tasks is to nurture these relationships. “A really outstanding feature of this state is the university and research sector. We have world leading universities, and key scientific and research organisations like the Defence Science Technology Group and the CSIRO. These are tremendous resources that can drive innovation in industry and ultimately support the capability of the Australian Defence Force. “We interface with this sector a great deal. Melbourne and Monash universities convened meetings of universities nationally www.businessfirstmagazine.com.au

to see how best to contribute to Australia’s next generation submarine program and next generation frigates. These types of collaborations complement a pretty compelling case we have put forward to locate an Australian Maritime Innovation Centre in Melbourne to support the Australian government’s massive naval shipbuilding plan.” These relationships are expected to filter down to small business suppliers which will further strengthen the Victorian economy. Through these major defence programs, the Victorian government can help SMEs innovate, build relationships with their primes and secure contracts. This will lead to work, finance and access to large global corporations they can work with in development of technologies. “SMEs help themselves by aligning themselves with primes who require help in building military vehicles, and even digital defence technologies so they can benefit from large scale contracts coming along,” Mr Combet said “And these types of opportunities will continue to grow. In the next decade the level of defence procurement will be massive. Military vehicle acquisitions alone will be in the vicinity of $15 to $22 billion which logically SMEs should be wellplaced to procure a good deal of work from.” Not only is Mr Combet an advocate for the Defence industry, he is also an campaigner for cooperation between State, Territory and Federal governments. “While Australia needs to have important defence alignments with countries such as the US, we also need to have our own defence industry capability,” Mr Combet said. “When Australia chooses a prime contractor on major acquisitions, that is a national security relationship that will last for decades. That contractor has a need to develop its capability within Australia.” “A cooperative approach between states, territories, defence industry and the Australian government will help to build the industry in Australia so that large and small companies alike can

Greg Combet AM benefit. This approach also services the economy,” he said By advocating for small business and the role it can play in building Australia’s defence capabilities, Mr Combet is bringing brand awareness to the Victorian defence industry. To support this, the Victorian government has just launched a brand campaign promoting defence industry capability and to help secure future major defence contracts. The campaign, Defence Excellence – Mission Possible, will appear in industry publications and defence supplements in major newspapers, as well as at outdoor billboards at key airports and CBD locations, targeting key decision makers and defence prime companies. The campaign complements the Government’s proposal to the two shortlisted bidders for the LAND 400 Phase 2 project, BAE Systems Australia and Rheinmetall Defence, to base their project activities in Victoria along with its major sponsorship of the Australian International Airshow 2017, to be held at Avalon Airport in late February. Mr Combet is helping to build on the strengths of the state and the strengths of the SME and research communities so that people recognise that Victoria is a key player in the Defence sector and a critical cog in the economic wheel. For more information on Victoria’s defence capabilities, visit defence.vic.gov.au BFM

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FEATURE| BFM

Agglomeration: a collaborative approach to empower Australia’s entrepreneurs Australia has more than one million small to medium sized enterprises (SMEs), accounting for the vast majority of companies in the country and providing around two-thirds of Australia’s jobs. Yet these businesses attract less than 20% of total private investment and often struggle to make the transition from exciting, entrepreneur-led businesses into ‘grown-up’ multinational companies.

ntrepreneurs face a number of challenges when growing their business and creating value. First, raising money for smaller businesses is really hard. There is a huge sea of capital waiting to be deployed into businesses, but small businesses are just not big enough or are considered too risky to attract it. SMEs are also often private, entrepreneurled companies and the lack of share liquidity puts off many investors who wonder how they will get their money back. Secondly, you need to be big to get big. This is called the scale paradox and it means that to land the biggest margin contracts companies need to be perceived as big enough to handle them, regardless of talent or expertise within the business. So for an ambitious entrepreneur looking to raise capital and build their business what are the options? One is to sell out to a larger company through a traditional M&A transaction, yet this often means losing control of a company that they have spent blood, sweat and tears to build. Another is an IPO which offers access to the huge pool of public market investors, but most SMEs are far too small to make this a workable solution. To empower entrepreneurs to grow their businesses and create value and jobs a new model is needed. The answer could be a collaborative approach called Agglomeration, whereby a group of small businesses within the same industry group together under a central holding company which then goes public on a major global stock exchange. Each entrepreneur swaps private stock for public stock in the holding company but continues running their business just as they were before. Their brand, their hiring and investment decisions remain under their control and each year that they contribute profit to the group they earn more shares in the public vehicle. Not a traditional M&A earn-out but an earn-in. The Agglomeration model offers entrepreneurs immediate scale and the benefits of being part of a much larger group, including a bigger consolidated balance sheet and access to a network of similar, like-minded small businesses offering products or services that can be offered to their own clients. An entrepreneur immediately transforms their company from a small business into a large multinational public company now able to compete for the largest and juiciest contracts and achieve better procurement deals. As a large public company an agglomeration also provides share liquidity which opens the door to public market capital and investors that would otherwise shy away from the SME sector. For the entrepreneur this

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liquidity offers the possibility of taking some cash off the table and provides a viable currency with which to fund tactical acquisitions or attract senior talent. A major factor in the success of the agglomeration approach is that each entrepreneur retains operational control of their business. Unlike in a traditional M&A buy-out, synergies and company culture are not forced on member companies, but instead successful business owners are empowered to keep doing what they have been doing so successfully, but now with a platform on which to aim even higher. Through a common purpose - to build the value of the group collaboration and synergies occur organically without being imposed from above. As more companies join an agglomeration through an exchange of private shares for public shares the value of the listed holding company will increase, deliver multiples in returns in very short periods making it a highly attractive model for public market investors. The Agglomeration approach has been trialed by a digital marketing and advertising company called The Marketing Group. This company went public on the Stockholm Stock Exchange as a collaboration of four companies in June 2016 and has since grown to include 18 businesses with offices across eight countries and EBITDA of €8 million. Each small marketing or advertising business that joins The Marketing Group must be mature, EBITDA accretive, debt-free and led by a leader in its field. However, the beauty of the agglomeration approach is that it can be applied by entrepreneurs in any fragmented industry and across national boundaries. Where ever there are large numbers of small, independent companies there is the potential to roll those businesses together into an agglomeration. small, independent companies there is the potential to roll those businesses together into an agglomeration. Agglomeration means “to form a cluster” and it is an idea aimed at addressing a broken investment universe that holds entrepreneurs back and prevents them from reaching their full potential. By empowering talented entrepreneurs and giving them the tools they need to succeed agglomeration has the potential to change the way small and medium sized enterprises grow and create value in the future. BFM Callum Laing is co-Founder and Director of The Marketing Group and author of ‘Agglomerate - Idea to IPO in 12 months’ and ‘Progressive Partnerships - The Future of Business’. He is partner in the Singapore-based Private Equity firm, Unity-Group.

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BFM | SOUTH AUSTRALIA FEATURE

SOUTH AUSTRALIA:

A STATE OF REINVENTION South Australia is an economy in transition. Devastated by the waning of the mining boom and the death of the car industry, South Australia has an unemployment rate that’s the highest of any state or territory.

Martin Hamilton-Smith, SA Minister for Investment, Trade, Defence Industries and Small Business.

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ut the state’s economy is now going through massive changes. South Australia is being transformed from what was one of the nation’s laggards into what could be a leader. It is now building $89 billion worth of sophisticated naval ships. It has recently launched the HMAS Brisbane, the air warfare destroyer, which has on board some of the smartest technology in the world. It is putting together 12 French designed submarines. Every one of them has one million parts. There is more scientific and engineering complexity in the submarine than in a space shuttle. According to Martin Hamilton-Smith, South Australia’s Minister for Investment and Trade, Defence Industries and Small Business, the state has “well and truly moved on from the negative of automotive deconstruction.” Unlike the days of the auto industry, South Australia is now developing industries that are export focused. “This is going to be significantly bigger than automotive and it will create jobs, and more investment and more enterprise than what automotive ever did in South Australia and it will be in the high margin, low volume, high value end of advanced manufacturing, not the high volume, low margin, low value automotive sector,” Hamilton-Smith says. “We are building Ferraris, not sedans.’’ “There is a synergy between what’s going on defence across to medical devices which are themselves advanced manufactures and we are strong in the area.” South Australia has about 40 per cent of the nation’s electronics industry. It is also particularly strong in oil, mining and gas supporting industry and there are crossovers into gas, medical devices and defence. “What’s going on in South Australia has more to do with restructuring than it has to do with deconstruction. We are restructuring and reorganising this economy for a completely new wave of growth and that’s in advanced manufacturing,’’ Hamilton-Smith says. It’s not just in advanced manufacturing. South Australia is a world leader in the global wine industry and food. “We produce significant quantities of the nation’s wheat and bulk commodities like barley and it’s some of the highest quality in the world,” says Hamilton-Smith. “We are also very strong in meat, horticulture, veg and increasingly in luxury premium www.businessfirstmagazine.com.au

SOUTH AUSTRALIA FEATURE| BFM

Launch of the HMAS Brisbane, 2016: (Left to Right) - Tim Barrett, Vice Admiral and Chief of Navy; Dan Tehan, Federal Defence Personnel Minister; Martin HamiltonSmith, SA Minister for Investment, Trade, Defence Industries and Small Business

food, everything from cherries right through the high value nuts, peanuts, almonds all of which are selling extremely well.” “We are at the lead of the dining boom. There was the mining boom and now there’s the dining boom and that’s involving premium luxury foods and wine. And our exports in this area are heading north at high pace and we are doing extremely well in that space.” The third area is services. Tourism is going gangbusters. Adelaide has attracted 35,000 international students with a growth rate of 9 per cent in that sector. South Australia also has premium attractions you can’t see anywhere else in the world like Kangaroo Island and Flinders Ranges. It is where the outback meets the sea. Internationally renowned travel company Lonely Planet has ranked South Australia as one of the top five mustsee regions in the world for 2017. Then there is health. Adelaide will have the world’s biggest, the most expensive and the most high tech hospital. The new Royal Adelaide Hospital will open in 2017 at a cost in excess of $2 billion. It will be the newest and best hospital in the world for a year or two. Right alongside it is the South Australian Medical Health Research Institute which again is full of hundreds of cutting edge scientists working on everything from cancer research to stem cells What are South Australia’s competitive advantages? “We are a small state in population, we are the driest state in the direst continent on earth.’’ Hamilton-Smith says. “We are at the end of the river. We do not have the masses of coal that bring automatic wealth to NSW and QLD before people even get up in the morning. We do not have the quantities of oil, gas and iron ore that you see in WA. And good luck to those states, they are very fortunate to have been gifted those benefits. “We have always had to be a smart, agile, quickthinking state and for that reason, we are more creative than many.” www.businessfirstmagazine.com.au

It is also less expensive. Presenting to investors, Hamilton-Smith asks two questions: What you can buy for a million dollars in the way of a family home in Adelaide within five kilometres of the CBD? What you get for a million dollars within five kilometres of the CBD of Sydney and Melbourne? The answer is obvious. This is why Adelaide was ranked the most cost-competitive city in Australia, ahead of Melbourne in global auditor KPMG’s 2016 Competitive Alternatives Report. South Australia is moving forward. Following the announcement of the car industry’s closure, the government set up Investment Attraction South Australia (IASA) in October 2015. The results have been spectacular. In just 12 months, IASA has been able to secure significant FDI deals. One is Greaton Group (formerly Zhengtang) from China which has committed to building the $300 million West Franklin apartment complex in Adelaide’s West End. The second is the joint venture deal between South Australian firm Micromet and Chinese company Dadongwu, signed in March 2016, to manufacture technologically advanced wastewater treatment for the Chinese market. South Australia’s booming agricultural and agribusiness sectors provide enormous opportunities for overseas investors. As Hamilton-Smith says, the state is now totally export focused, and exports are bringing in the money. “For South Australia, our trading partners are overseas,” Hamilton Smith says. “We depend on selling things to the other states as well but a small state like ours we are looking north, we are looking west and we are looking east We have about 65,000 jobs in South Australia that hinge on selling our goods and services overseas. That’s 65,000 meals on the table every night directly from selling our things overseas.” BFM

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BFM | SOUTH AUSTRALIA FEATURE

Innovation, collaboration, consolidation: how Tonsley is taking entrepreneurship to the world When Mitsubishi Motors ceased production in Adelaide in 2008, there was a clear imperative for the South Australian Government to do something innovative and internationally significant at the 61 hectare site. This led to the creation of the Tonsley Innovation District. Business First Magazine speaks with Precinct Director Philipp Dautel about the vision for the precinct and the need for innovation on a national scale. Business First (BF): What was the vision for Tonsley Innovation District and how has it come into effect? Philipp Dautel: (PD) The vision was to create a precinct that would assist South Australian businesses, in particular manufacturing, in their move up the value chain and into global markets by transitioning to a high value industrial base underpinned by innovation and collaboration. Tonsley Innovation District is

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now a world-class destination where entrepreneurs, researchers and businesses large and small, co-locate to drive productivity, innovation and global competitiveness. The model – based on a partnership between the State Government through Renewal SA, university and industry – delivers high amenity, mixed use urban development, populated with anchor businesses as well as research and training institutions,

in an environment that supports entrepreneurial activity and a culture of innovation. Tonsley’s four focus sectors reflect South Australia’s major economic strengths and opportunities: Health & medical, Cleantech, Software and simulation as well as Mining and energy services. Tonsley’s success as an innovation district derives from the quality of the relationships between its partners and its unique www.businessfirstmagazine.com.au

SOUTH AUSTRALIA FEATURE| BFM

design promoting an inclusive destination and allowing for Industry-research and business to business collaborations. BF: How would you describe the innovation scene in Australia? PD: Innovation is growing across all industries in Australia, shaping the future for businesses large and small. Recent data shows that start-ups and early-stage companies generated nearly all of the 1.6 million new jobs created in Australia from 2003 to 2014. Traditional manufacturing is declining; the services industry is being disrupted through new digital technologies. What worked in the past is probably not going to work in the future â&#x20AC;&#x201C; and that applies to any business, irrespective of the industry they are in. BF: Where do you think South Australia fits into this landscape? PD: South Australia has long been leading the country through various initiatives led by the State Government such as research and development and Commercialisation Grant Programmes. Adelaide is also fostering growth in the innovation economy by supporting coworking spaces, accelerators or more physical assets like the $250 million Tonsley project. Complementing South Australiaâ&#x20AC;&#x2122;s efforts, the federal government now also has a focus on innovation and economic growth through the National Innovation and Science Agenda and the Smart Cities Plan which support productive, liveable cities that encourage innovation, jobs creation and growth. BF: And how do you think Australia in general fares against other countries? PD: Australia is a world-class destination for innovation with solid foundations in modern infrastructure, high levels of investment and strong intellectual property protection. The greatest resource for Australiaâ&#x20AC;&#x2122;s innovation scene is our national research capabilities across research organisations such as Universities and the CSIRO. The Australian government spends www.businessfirstmagazine.com.au

around $9 billion a year towards science, research and innovation which supports pathways to commercialisation. In Adelaide, initiatives such as Gig City are providing super-fast internet (10 gig per second) at affordable prices by leveraging existing broadband research network infrastructure across a number of centers. Adelaide is the first international city to join the growing US Ignite Smart Gigabit Communities Program, creating new opportunities for innovative businesses to collaborate and share information with fifteen other Ignite communities in the USA. BF: What do you think needs to be done to nurture and facilitate innovation and ideas? PD: The key is to link research and industry with Government, where local, State or Federal partnerships can facilitate the process. Importantly, there also needs to be a place for this to happen which must promote and enable collaboration. Innovation needs a home where the creative process is at the centre and where the innovation process is a professional discipline and not a rare, singular event. This is precisely what Tonsley offers, a place where people can meet, collaborate, experiment, ideate and prototype new solutions. BF: What did you want to integrate into the precinct when it was founded? PD: The foundation was the partnership between government, academia and industry to design a mixed-use precinct that incorporates high density residential, retail, education, commercial and industrial land uses. This partnership is known as the triple helix and combines physical assets (buildings, infrastructure and land), economic assets (business in the broadest sense) and networking assets (through a culture of innovation). The result is clustering activity from businesses with a shared industry focus in fields where South Australia has a comparative advantage in an environment that supports entrepreneurial activity and a culture of innovation.

BF: How do you help businesses? PD: The Tonsley advantage is that we can help businesses from start to finish, from assessing their suitability as a business to relocate to Tonsley all the way through to building and construction. We seek to attract innovative companies to the district across four key sectors: Health & medical, Cleantech, Software and simulation as well as Mining and energy services. Once on site, these businesses benefit greatly from the collaborative approach, providing connections to businesses, research and solution providers. BF: You also connect these businesses with finance and resources? PD: Tonsley provides particular support for start-up companies and smaller businesses that require assistance. On site groups such as Innovyz and Flinders University New Ventures Institute are active in assisting entrepreneurial endeavours. In addition, some funding is available through Government agencies. Businesses on site can also benefit from professional services providers located at the co-working spaces which provide support and assistance in IP protection, legal, finance and accounting, IT and cloud solutions. BF: You have mentioned a range of sectors, how does clean or med tech relate or differ to what is happening in mining? PD: It is interesting to find how many ideas are transferred

BUSINESSFIRST MAGAZINE

Australiaâ&#x20AC;&#x2122;s first innovation district Innovation lives here. The Tonsley innovation district in South Australia unites some of the worldâ&#x20AC;&#x2122;s fastest growing industries in a focused, dynamic environment.

Be part of the future. Be part of Tonsley.

Tonsley brings together leading edge research and education institutions, established businesses and start-ups, as well as the community to connect and collaborate. Working within this collaborative environment, you will be supported by peers, educators and the government to accelerate your products and services to market. Tonsley sets new standards for driving innovation and collaboration at the highest level and realising the future.

tonsley.com

For Tonsley investment enquiries contact: Philipp Dautel, Tonsley Precinct Director philipp.dautel@sa.gov.au +61 8 8207 0444

SOUTH AUSTRALIA FEATURE| BFM

from one sector to another. The question often being asked today is “what can we see in other sectors that we can use in ours?” High value manufacturing is the overarching theme which crosses over all of these industry sectors. Where in the past we would usually see industry sectors in silos, Initiatives such as Tonsley provide a platform to share and apply technologies across various sectors. In fact, that is often the biggest growth potential for businesses to diversity. A medical sensor can suddenly have a significant positive impact at a mining operation. One example is Radical Torque Solutions – a company that has confirmed a $2 million investment to expand its operations for a state of the art service, calibration and manufacturing workshop at Tonsley. Radical Torque Solutions are delivering a linkage between gas rigs and mining trucks as well as dental and orthopaedic implant torque tools used by surgeons. The idea of having multiple high-value businesses from different sectors located on one site nurtures and develops these opportunities almost organically. BF: What approach do you take to each sector? PD: Our whole of government approach attracts local, national and international investment through agencies such as the Investment Attraction South Australia (IASA), Health Industries SA and similar bodies. These groups have detailed knowledge and experience about key focus sectors and are most successful when we work together. In addition, we engage with industry and potential investors directly from interstate and also internationally. BF: Who are some of the businesses you have worked with? PD: Siemens Australia: The Government of South Australia has a Memorandum of Understanding (MoU) with Siemens AG (the international corporate parent company of Siemens Australia). The MoU confirms Siemens a strategic industry www.businessfirstmagazine.com.au

partner to Tonsley, ensuring the redevelopment of Tonsley, incorporates global perspectives through sharing information on future trends and opportunities. SAGE Automation: Australia’s leading provider of industrial automation and control services with specialist skills and experience in the defence, infrastructure, manufacturing and utilities sectors. They will move to Tonsley in mid-2017. Azzo Automation: provides energy management, electrical engineering and industrial automation services to businesses across Australia and globally to over 15 countries around the world. They will move into new premises at Tonsley in July 2017. Hydrix: an advanced engineering design company providing engineering and product development services to a broad range of customers looking to develop, manufacture and deploy niche, high-technology biomedical, industrial and consumer devices. Advanced Focus: an engineering solutions specialist focussed on sustainable process. They moved into Tonsley in February 2016. Signostics: design and manufacture portable, hand-held ultrasound devices. Micro-X: develop, assemble and export their innovative, portable x-ray products to companies around the world. Somark Innovations: manufactures an integrated end-to-end pre-clinical medical research management system utilising visual identification, micro-RFID (radio-frequency identification) technology, data readers, data hubs and software that aggregates and analyses data Co-working space ‘Co-HAB’: opened in April 2015, operated by Innovyz. This facility provides accommodation and support for start-ups, entrepreneurs and small businesses in an affordable, collaborative environment. Innovyz also offers a business accelerator program and consultancy which provides endto-end support to help innovators build and grow companies to bring their innovations to market. Radical Torque Solutions:

equipment supplier to global oil and gas companies, specialising in tools that require exact torque applications. Radical Torque Solutions has confirmed a $2 million investment to expand its operations for a state of the art service, calibration and manufacturing workshop at Tonsley. Hydroflex: produce a hydrogenbased fuel reduction system for internal combustion engines. The company is originally from San Diego, California USA, and is now operating from the Co-HAB coworking facility at Tonsley. ZEN Energy Systems: the largest solar energy provider in South Australia. 3RT: 3RT are a company that has been established to commercialise technology to make a composite timber product using waste timber materials. The company’s pilot machine is operational at Tonsley with help from Flinders University’s Centre for Nanoscale Science & Technology (also located at Tonsley). Tonsley TAFE is designing and making furniture from 3RT’s hybrid timber to help test the material Latent Heat Storage: established a testing facility at Tonsley for their energy storage plant which uses

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BFM | SOUTH AUSTRALIA FEATURE

molten silica as an energy storage and recovery media. BF: Who was the first business partner and how have the numbers grown? PD: Our early founding partners included vocational training institutions TAFE SA and Flinders University together with the City of Marion Council and State Government. Siemens was also an important early anchor tenant, spearheading the now list of 75 businesses that employ around 1000 workers – a return to the same number of workers that were on site when Mitsubishi ceased operations in 2008. BF: What do you look for in a business that aligns with the district? PD: First and foremost, we look for innovative businesses that actively want to collaborate with other businesses and research providers. The business has to be inclusive and to a certain extent be willing to contribute to the Tonsley District. Future tenants are assessed through our suitability matrix which identifies how well the business aligns with the district and whether they will complement or contribute to the value chain of other businesses on site.

BF: What have been some of the best innovations you have seen? PD: It’s difficult to pick the best since many of these ideas developed at Tonsley are continuously progressing and evolving. The most recent innovations through Hegs Pegs, Micro X and Voxiebox are exciting to watch. SAGE Automation will be on site at Tonsley from July 2017 and is a company which continually innovates across its focus areas. BF: What are the long term plans? PD: Tonsley will continue to attract more exciting businesses and research organisations on site that lead to more ground-breaking technologies, innovative products and services and ultimately, jobs of the future for the region. The redevelopment of Tonsley will see significant development over the next 12 to 18 months including the completion of civil works for the first residential dwellings at Tonsley’s 11-hectare residential and mixed-use development. The medium to high-density development will deliver at least 850 homes and accommodate approximately 1200 residents. This will add to Tonsley’s vibrancy and activation through the inclusion

of additional retail and hospitality services as well as providing accommodation solutions ideal for business and academic travellers to Tonsley. During 2017, a further 9,000 square meters of tenancy space will be constructed within the Main Assembly Building (MAB) equating to around a third of the total lettable space in the MAB. Industrial land releases will also continue based on a staged roll out of infrastructure and public realm civil works programs. In the long term, the Government of South Australia intends to divest ownership of all property assets at Tonsley. At the completion of the project delivery phase, the intention is to leave behind a self-sustaining precinct governance model that will have ongoing responsibility for maintaining Tonsley’s culture of innovation, collaboration and entrepreneurial activity. It is intended that the ongoing governance model will continue the ‘triple helix partnership’ by including representation from the Government of South Australia, the City of Marion, Flinders University, and Tonsley business occupants. BF: What is the overall goal for the state of SA in this? PD: The Tonsley vision is to transition our existing capacity and capabilities in traditional manufacturing into globally competitive higher value products. This vision is gradually being achieved and is providing a unique operating environment for businesses that support commercialisation and a culture of entrepreneurialism, innovation and excitement. BF: What more do you hope to achieve? PD: Over the coming years, Tonsley intends to become firmly established as an economic growth engine for South Australia as the precinct reaches a critical mass of industry, research, education and commercial activity collocated on the site. The ambition is for Tonsley to be a globally recognised innovation district, considered on a par with districts such as those in Philadelphia, Netherlands and Sweden. BFM

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Professor Phyllis Tharenou

THE CHANGING FACE OF TEACHING IN BUSINESS As Executive Dean of the faculty of Social and Behavioural Sciences at Flinders University, Professor Phyllis Tharenou has been instrumental in the recent evolution of business studies, to the point where Flinders is recognised as a world top 2 per cent tertiary institution according to the Times Higher Education rankings.

member of the Board of the Australasian Council of Deans of Arts, Social Sciences and Humanities from 2012-2016 and the Don Dunstan Foundation management committee, Professor Phyllis Tharenou brings a wealth of experience as a senior executive closely involved in the management of Flinders University. Her influence was honed from her early days at Queensland and Griffith Universities and QUT School of Management. Professor Tharenou was always interested in management as a Fellow of the Society for Industrial and Organizational Psychology (US) and the Australian and New Zealand Academy of Management and took an applied focus to her learning that led early in her career to a highly successful consulting career based on experiential learning and teaching. Based on the philosophy of experience, the changes Professor Tharenou has brought to Flinders Business School have been substantial. While ‘Flinders Business has always been strong, Professor Tharenou has harnessed excellent professional staff to build up a huge placement program, which was previously almost non-existent. “The changes I felt I could make were first of all to

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give students the opportunity to work with industry, government, the community in placements or live industry projects. For example, we didn’t have online courses. I thought I could introduce more flexibility into the way students study. So we put the MBA online. There were lots of chances there: there were degrees that we needed to delete, there were new ones we needed to add, there were courses that we needed to fix. We also needed to earn more researching income and we’ve done that.” Now, most of Flinders’ business students enjoy industry placements and live industry projects. “A lot of our large classes have live industry projects embedded in them, working with the University’s entrepreneurial arm, the Flinders New Venture Institute,” Professor Tharenou says. Professor Tharenou also redesigned the workload model. “Now a workload model is the way all university schools run,” she said. “Then there was introducing new degrees, deleting old degrees, fixing the curriculum. So I started off with the needed thing – the workload model – and then predominantly curriculum and process.” The result has been a huge improvement in the www.businessfirstmagazine.com.au

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Business School’s performance aided by an excellent balance of skilled continuing staff and enterprising new staff . Having just changed the financial performance of the school and very much increased its teaching revenue, the professional focus is now on increased placements and live industry projects and host organisations. Meanwhile, Professor Tharenou has renewed the academic staff and improved their qualifications, bringing in a more positive staff culture, which has influenced Flinders Business’ overall success. “We’ve had a big success. I mean, to just start with really basic things, our financial performance had been in deficit. We’re now well into the black. Our total teaching revenue went up by, I think it was 43 per cent. Our on-shore international teaching revenue has gone up 91 per cent since 2014. So first of all, we make a surplus now, we’re making money on-shore. Our placements are astronomic compared to where they were. I thank our wholly expert professional staff for that achievement. Flinders Business School has also seen a significant renewal of its academic staff, while some have retired and other highly credentialed staff has come in. For example in 2015, 68 per cent of Flinders Business School academic staff had PhDs. A year later, that number was 78 per cent. Professor Tharenou’s goal was to create options: new courses, new specialisations in innovation and enterprise, combined degrees and an updated curriculum. She says the University has special programs to prepare students for the outside world, and has recently teamed up with The Fox School of Business at Temple University, ranked a US top ten provider of online business, to turbocharge students’ entrepreneurial skills. Professor Tharenou says

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combined with work based learning, it gives Flinders students a leading edge when heading into the workforce. “The thing about our placement programme is we have a comprehensive matching process. We take our students and we assess them against the placements that are available and we match them. Then before they go to the placement we train them. They have a two-day training course, so they have the right sort of interpersonal and other skills to start the placement. I think the placement is probably the most important thing we do, because it prepares them for the real world. Instead of it all just being theory, it’s actually real application. The students appreciate it and we get a lot of positive feedback from it. And then there are the live industry projects, working hand in hand with the University’s New Venture Institute. This is a key entity helping to drive Flinders’ focus on Innovation and Enterprise, and has great contact with industry. Flinders Business School, with the NVI, runs live industry projects with real clients, where the students work as teams, solving real client problems. “I think that’s one of the most valuable things we do for students,” Professor Tharenou says. All up, the university is getting ahead of the changes now, transforming education and influencing the revolution going on in teaching. Professor Tharenou remembers at the end of the 1990s when she realised students were stopping coming to lectures due to the start of the digital revolution. “I think studying now is not always something you do face-to-face. Studying is not always something where you do a very long, laborious course, but you might do shorter modules. Studying is something that fits the sort of work you want to do. It isn’t just theory and isn’t just broad. So I think we’re in the digital age, I think we’re in an age of greater flexibility. It’s happening right now. It’s not something that we’re imagining is actually going to happen and it’s changing our institutions.” BFM

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COLLABORATING FOR INNOVATION Business faculties at universities around the world have long referred to the need to encourage ‘innovation’; yet in the world of extraordinary technological advancement and global volatility, the concept has gained a mainstream voice.

ome to the 5-star MBA program and comprising the Schools of Commerce, Management, Marketing, and Law, the UniSA (University of South Australia) Business School is the South Australia’s largest, and one of the nation’s premier, business schools, ranked in the top 1% worldwide. It is one of just nine business schools nationally with EQUIS accreditation awarded by the EFMD Quality Improvement System, and has also been awarded a QS five Star rating. It also has a major focus on creating enterprise and innovative students. Helping drive the Business School is Pro Vice Chancellor (Business and Law) Professor Marie Wilson. She has studied and worked around the world across a range of different industries, building extensive skills in the management of performance, decision-making and the human side of entrepreneurship and economic development. “At UniSA we encourage our staff and students to be entrepreneurial,” she says. “This is done by making it is easy for them to enter or combine new ventures with their existing roles, depending on their appetite. We support the innovation potential of businesses by making it easy for them to engage with UniSA staff and students, by lowering the barriers and supporting the formation of good collaborative cultures and shared expectations.” While Marie clearly understands the need for new graduates to be innovative and entrepreneurial, the current business landscape

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helps communicate the need at a broader level. She notes that she prefers Prime Minister Malcolm Turnbull’s quote of “collaborate or crumble” over the traditional “publish or peril” mantra of traditional academia, and says that universities and business working together is the key to driving innovation in Australia. “Innovation has always been important, but it is gaining media and political attention as an essential component of economic development and prosperity,” says Marie. “This has taken on greater significance as the traditional pillars of the Australian economy in agriculture, mining and infrastructure development are displaced by high-value manufacturing, and knowledge intensive services like financial services, healthcare and education. “Australia’s future standard of living depends on our ability to innovate first-in-world solutions to emerging problems that can be exported to the world’s markets.” While many people talk about innovation helping business remain relevant in a declining economy, Marie says the concept can work both ways. She acknowledges that some businesses will use innovation to adapt; however she is also quick to point out that challenging environments often create innovation. In any respect, the business relies upon its people and their capacity to take on new ideas and technologies from outside the business and to collaborate with others. In doing so, Marie aims to create a Business School where students

will take concepts into their future careers. She notes that many of the principles engrained at UniSA are markers for innovative businesses across all industries – particularly the benefits of collaboration. “I think there are signs that tell you that your business is on the right path to innovation. One is having many and diverse links into other businesses and research organisations that allow them to keep abreast of emerging opportunities and threats. Another is an appetite for growth – because comfort with the status quo is the enemy of innovation. A very close link to the international pulse is critical, particularly an awareness of fast changing international markets.” This “appetite for growth” relates heavily to a positive culture – another important ingredient for the innovative business world. Marie notes that “culture is at the very heart of innovation” and she says she is keen to instil the concept into her students so they will take it with them. “Even in a research-led environment, space needs to be created for innovation,” she says. “In my labs I always have encouraged the ‘Friday-afternoon experiments’ for trying out potentially disruptive and crazy new things. Generally the best and most truly disruptive innovations come from connecting things from different domains of expertise in unexpected ways – and I think this applies to business as much as the research world. It requires making time – you can’t just assume it will happen in due time.” www.businessfirstmagazine.com.au

SOUTH AUSTRALIA FEATURE| BFM

Professor Marie Wilson

While innovation is heavily linked to natural attributes of being curious, creative and open to change, UniSA is aware that there are other skills which need to be fostered and potentially even taught. Patience, communication and networking don’t always come naturally to everyone but are equally important to drive innovation, and so there is a focus to include such elements into the learning modules. “Teaching is a cornerstone in linking new and emerging knowledge into practice,” says Marie. “It is also pivotal in bringing the problems and challenges faced by those in business and the community to the attention of the higher education community. In doing so, it shapes the research questions that are explored in our universities. “Universities are tasked with creating new knowledge. UniSA takes particular pride in partnering with research end-users, big and www.businessfirstmagazine.com.au

small, industry and communities, both to shape the directions of our research and to facilitate the translation of the knowledge generated by research into tangible outcomes.” With such an approach, UniSA is having a significant impact not only on students, but also the business world in South Australia. For existing businesses, UniSA has both a commercialisation arm, UniSA Ventures, that helps to take new ideas into business use, as well as the Innovation Collaboration Centre supporting the lifecycle from idea technological startups to growth expansion, and the Centre for Business Growth to work with them directly in developing the skills and practices that will support them to innovate and grow. Its students are increasingly trained in innovation and problemsolving and are keen to engage in projects and internships with local companies, often with support and participation of local researchers

to add the most current knowledge to work-in-progress. In addition, the Business School is leading the whole-of-university Vice Chancellor’s Innovation Fellowship - Bachelor of Innovation (Honours) degree - that is open to graduates from any area of study. A truly industry collaborative opportunity that sees students working in cross-disciplinary teams to solve real-world problems that have been proposed by organisations which need innovative breakthrough thinking. It is another example of the importance that UniSA places on collaborating, and the pleasing notion that education and business need to work together to grow, develop and … need we say … innovate. “The most important way in which teaching links to innovation is the creation of trained graduates who have the skills and opportunity to be the agents of innovation.” BFM

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Taking an active approach to community progress Local councils are often criticised for a lack of action or an overzealous desire to please everyone, whilst causing more division. However when a council works, it becomes a shining example of successful leadership and community strength. With the imminent closure of the GM Holden factory in his region, Business First speaks with born and bred Playford (population 90, 000) Mayor Glenn Docherty about building strong communities, overcoming setbacks, and working towards a common goal. Business First (BF): What is the key to acting in a community’s best interest? Glenn Docherty (GD): Playford is a very proud community and one that has a strong voice. I believe you have to listen to your community, engage with them and keep their needs front of mind when initiating projects, setting budgets or formulating policy. I also feel you have to make yourself accessible and always try and find positive and constructive outcomes. Every year I receive thousands of contacts either as phone calls, email, faxes, social media posts and letters from residents, community groups, businesses and the industry sector and I make sure I respond to every contact I receive. BF: How do you meet the diverse needs of the community? GD: I’m a very hard working and active member of the Playford community. Every year I attend approximately one thousand events hosted by cultural organisations, service and sports clubs, religious groups and charities. I believe this regular grass roots involvement with my community enables me to understand their needs and desires and to be approachable. From my point of view, it doesn’t matter what background or what economic status you have, you can always come and have a chat with me and raise your individual or groups’ concern.

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BF: How would you describe the Playford community? GD: It’s a very interesting region and so are its people. From our indigenous roots we evolved into farmland and then in the 1950s the government of the day saw a need to establish The Satelite City of Elizabeth to drive South Australia’s economy with a focus on manufacturing at the new General Motors Holden plant. At the time many workers emigrated from the United Kingdom to live in state-sponsored worker housing. However over the years as our economy changed and evolved, so too did the Playford community. The next wave of migrants from southern Europe and then Asia played a very important part in creating Playford’s thriving horticulture and viticulture industry. These days Playford is one of the fastest growing regions in Australia. Approximately 66% of the population is Australian-born and 38.5% is aged 24 years of age and under. Skilled migration is still important and these days our newest citizens hail from all corners of the globe – from South America to Scandinavia, India, China and the United States. Our public housing belt in the meantime has undergone one of Australia’s largest urban renewal transformations. It’s a joint venture between local and state governments and private

developers with the aim of providing better homes and a better life for some of our most vulnerable people. BF: What are the biggest needs of the community? GD: Job creation is our region’s biggest need. As our reliance on manufacturing decreases, re-energising our economy and creating local jobs for local people is paramount and instills confidence. We must also ensure we continue to provide good infrastructure for our growing community, for example our roads, rail network, hospitals, schools, parks etc. BF: What are your goals as Mayor? GD: My goal is to make sure our residents reach their full potential. Many people from the Playford region have gone on to do great things and even become famous musicians, politicians, filmakers, business owners or surgeons. I want every child in Playford to have every opportunity that was afforded to me. I’m also committed to driving the next wave of investment to the City of Playford – from our local business community to interstate and overseas investors. We recently signed a Memorandum of Understanding with a Chinese City Zibo to potentially invest and allow our companies to export our food, wine and other products. www.businessfirstmagazine.com.au

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Mayor Glenn Docherty

BF: What have you achieved so far in your time as Mayor? GD: The first major achievement was working with the Federal Government to build the Stretton Centre - a dedicated business advice and job portal centre. I have overseen a record infrastructure spend and increased focus on water security by creating a vast network of wetlands to harvest and recycle water. That said, perhaps my proudest achievement was helping to get our $500 million dollar Smart City project off the ground.

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BF: What projects are on the go? GD: Our world class CBD development will be, without doubt, the most exciting chapter in Playford’s history. Located in the heart of Playford, this is our largest and most ambitious project – featuring high-rise offices, hotels, eateries and educational facilities and entertainment arenas- such as the proposed privately funded largest ice rink in the Southern Hemisphere. It also helps transition our region from traditional manufacturing to a digitally connected community. We will use innovative technology to grow and diversify our economy,

create jobs and reduce the cost of doing business. The CBD will be built around the new Prince George Plaza – a tribute to the young royal, whose parents I hosted in Playford in 2014. The Plaza will have access to one of the fastest broadband networks in Australia. Our other major projects include one of the newest and smartest health precincts in South Australia located in and around the Lyell McEwin hospital. Health care and social assistance is Playford’s second largest employer according to the latest census data (1000 new jobs between 2006-11) and we expect this number to grow.

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Furthermore, work is underway on our $55 million Smart Sports Precinct which caters for multiple sports. From tennis to lawn bowls, soccer and softball, it will cater for high-end competition and training as well as local community sport for all residents. BF: What will these projects do for the community? GD: Our region is currently experiencing a great deal of economic change. A key driver of this change is the imminent closure of the GM Holden factory. As a result Playford had to move quickly and evolve. Our community needed solutions and it needed to be inspired, so we successfully lobbied hard across the public and private sectors to secure investment and create new jobs in new industries and growing industries of the future - such as

health care, defence, advanced horticulture production and advanced manufacturing. BF: What state in terms of timeframe etc., are they in? GD: The Sports precinct is coming to the end of Stage 1 and about to embark on stage 2 which includes securing A-League soccer team Adelaide United, new lawn bowls facilities and our $9 million tennis centre is also under construction. As I mentioned the CBD is in the first stage of development. 12 multipurpose allotments are being created as we speak. The first of which is a new $20 million state-of-the-art privately funded health care facility. Our dedicated health precinct is an evolving project with the first developer investing $90 million towards an aged care facility and research hub. This comes on the back of the government’s $340

million upgrade of Adelaide north’s Lyell McEwin hospital. BF: What is the legacy you would like to leave? GD: Our council’s goal is for everyone to have the opportunity to get great ongoing work in the local area. I want our families to have a positive image in the area that they live in – as they did when this landmark city was first created. I want to change the stigma that has for too long been associated with the northern suburbs of Adelaide and to get through this tougher time of our history. I have two young daughters who are about to start school. I want them to feel optimistic about where they live, about finding secure work and raising their own families without any concern about having to leave this great region. BFM

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Innovation in law, the process of disruption Holman Webb chief executive officer Greg Malakou says that innovation gives his law firm a competitive advantage. It’s fundamental to the firm’s growth strategy. Mr Malakou brings a business perspective to law. Which is not surprising seeing that he is not a lawyer writes Leon Gettler.

Throughout the interview, Malakou peppers his conversation with mountain biking analogies. The South African born native is a self confessed adrenaline junkie and mountain bike riding enthusiast. Having moved to Australia in 1985 he started as a financial controller with multinational advertising agency Ogilvy Mather. After that, he was the finance director at Phillips Fox Lawyers which has since become DLAPiper. After rising to the rank of national finance director, he became more interested in general management and in having overall operational responsibility for the business including developing and implementing strategy. To broaden his management experience, he joined a large accounting firm, Horwath NSW, as their chief operating officer and was central in their merger with Deloitte. He has been Holman Webb’s chief executive officer for the last eight years. “I came from a professional service background in finance and then moved to general management and then into the C-suite as COO and CEO,’’ Greg says. “I have always had a fascination with law and I obviously studied business law as part of the curriculum for my degree and professional qualifications, but I have never studied it with the

Greg Malakou

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objective of becoming a lawyer.” What his background and experience did do was give him an understanding of why Holman Webb needed to innovate and play its part in modernising the industry and its involvement in change. Not necessarily as primary innovators of change but certainly as early adopters, and enthusiastic agents of change in a number of areas. Although Holman Webb hasn’t been the first off the block in this respect, the firm has been very quick to recognise that change was and is essential.. “You have to jump in and become early movers. We haven’t been primary movers but certainly early movers and advocates of change in a number of areas. We’ve been very early adopters and advocates of a performance based culture. We’ve linked performance with remuneration at an early stage. We also adopted internal flexibility in the workplace, along with automation of business and management processes and legal processes. We jumped in pretty early and reaped some significant benefits out of that.” One of the things he says Holman Webb has done particularly well is provide transparency of its legal services and pricing to clients, recognising that one of the biggest beefs of clients is that they were often kept in the dark about the whole legal process. To counter this, a decade ago Holman Webb came up with what they believe was a revolutionary way of giving client’s access to their information. “We developed a proprietary client interface with our own systems which allowed clients to view all their documentation, correspondence, financials and basically all the current legal work on their matters at any particular time.

“A number of our competitors were then forced to match our capability with the result that a lot of firms now offer something similar. We pride ourselves in the fact that we were one of the first firms to facilitate that level of detailed real time access to our clients. Holman Webb was also very early advocates of offering its clients alternative fee arrangements, doing away with the old billable hours regime and offering clients alternative fee arrangements to provide them with a lot more certainty over their legal spend. A further innovation they are currently undertaking is the trialling of online court processes. “The adoption of this technology will result in significant savings to our clients by reducing the time spent in court. As far back as 1989, we were leading the way with our clients by focusing on early resolution processes to settle cases. We have established a reputation for quickly resolving matters whereas many other firms have never achieved this. I think we recognised early on that if you get a resolution earlier in the process, it may not only result in a significant financial saving for the client but it also enriches and entrenches the client relationship.” Greg says that innovation and service excellence is critical in the legal services market where there is now significant downward pressure on prices and fierce competition for legal work. He says the market is in a highly disruptive state, with traditional practices quickly becoming obsolete which is initiating a desperate need for firms to differentiate themselves from their competitors. The question is, in a mature and highly overcrowded market, how do you make a difference? How do you get yourself out there as being the best law firm to use, or being www.businessfirstmagazine.com.au

PROFILE| BFM

the professional service provider of choice? It’s not easy. “It’s a highly competitive market with unprecedented price pressure so innovation and client business development is now critical to survival strategy. You have to do things better, you have to innovate, and do things differently. Above all, you need to be highly client centric. If you don’t, you’re really exposed in terms of survival.” He says there are four things that set Holman Webb apart from other firms. “One of the complaints we used to hear from clients is that lawyers aren’t commercial enough. I think we’re quite unique in that we’ve attracted a number of partners who have previously held very senior in-house roles in high profile companies or in government. The result is that our lawyers are not just great lawyers. They also have an acute business instinct and true commercial experience in that regard. “The other thing is that we like change, we welcome change. As

I’ve said to my executive team, change is like learning to ride a mountain bike. It seems daunting at the beginning and you get bloody, and you get things broken. But eventually you get on top of it and you start to see the rewards, and you start to really enjoy it. “Number three, I think is that the owners of the business here have the good sense to know they can’t be experts in everything. All our partners are specialists and not general practitioners. It can also be difficult for a lawyer to loosen the reins on other aspects of the business but the partners here realise that they can’t be the best marketers, the best IT specialists or the best accountants while also being the best lawyers. It is essential to have a strong specialist executive management team for operational management of the business. By design we have a particularly strong executive management team, which I think also sets us apart.” Finally, Greg believes the fourth thing that sets the firm

apart is its strategic approach to relationships, particularly its corporate sponsorship alliances. The approach Holman Webb takes in this regard is long term. “Our marketing and business development teams keep up with any changes and developments in all the sectors we specifically serve. Our lawyers are on top of what’s happening in their industry, on top of any developments and on top of any changes in legislation which may impact on our clients’ businesses. Team members are also active committee members in relevant bodies, including industry associations and various governance groups. They get involved in the shaping of policy in representing Holman Webb clients and their clients’ industries and interests in those industries. Ultimately the firm’s growth strategy is tied to the innovation of its service offerings. “Holman Webb’s growth has really been motivated by our ability to embrace the disruption that we’re facing.” BFM

brilliantly different

At Holman Webb, over half our partners have joined us from in-house and general counsel roles. We know the demands and pressures of corporate life. So if you’re looking for a brilliantly different law firm with real business instinct, visit us at www.holmanwebb.com.au SYDNEY | MELBOURNE | BRISBANE | ADELAIDE

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THERE ARE ONLY 2 PEOPLE ISSUES IN BUSINESS — AND YOU PROBABLY HAVE BOTH People are at the foundation of every great business. In order for a team to achieve the company’s vision, the team must be surrounded with truly great people, top to bottom throughout the company.

any leadership teams know this, but they aren’t aligned on how to build a great team. Things quickly get muddy when it comes to what action to take, how to execute it, and when. In a survey of business owners, 82% cited people issues as their number one frustration. That’s because most teams haven’t taken the time to get crystal clear on their unique definition of what it means to be a “great person” for their company. And if they have a general idea of what a “great person” looks like for their team, then the next typical challenge is that they aren’t consistent in applying that definition to every role in the company. As a result, a leader can feel like they have 22 different people issues at any given moment. And that is an extremely overwhelming feeling. How do you overcome this? By understanding that at the root, there are only 2 people issues, not 22. The Entrepreneurial Operating System® (EOS®) boils down all of the symptomatic people problems you have into two root issues: right person, wrong seat or wrong person, right seat. RIGHT PERSON, WRONG SEAT “Right person” means that your employee fits into your culture. They truly care about what you care about. You love them. They share

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your unique core values. “Wrong seat” means that the roles you expect them to fill aren’t a right fit for that person. They aren’t a rock star for the seat they’re occupying. Maybe they were at one time, but something has changed. Perhaps your company has grown or adapted in some way where it requires different skills and abilities than it did before. And now they may not be able to understand what the company needs from their position, they may no longer want the position, or they may not have what it takes to do what the company needs them to do. HOW TO HANDLE THE WRONG SEAT When someone is the right person who shares your values, you can often look throughout the company to find a different seat that’s a better fit for their talents and abilities. The challenge is when there is no seat or position available for them. This is when you’ll face a tough decision, and ultimately you’ll have to let them go. A decision like this is simple, but never easy. Always keep the greater good of the company in mind when faced with a tough decision like this. WRONG PERSON, RIGHT SEAT “Wrong person” means that they really don’t fit into your culture. They don’t share your core values. Or it feels like they’re “hot and cold” all the time—sometimes they feel like a fit, whilst other behaviors show otherwise. For some of these people, they act one way in front of their boss, but they act another way when the boss isn’t around. These people are inconsistent at best. And that’s the nice way of putting it. “Right seat” means that this person is extremely talented. They’re very skilled at what you expect them to do, day in and day out. They may even be one of the

top performers for their role in the company. They understand the bigger picture of what they need to perform, they want to do it, and they have what it takes to get it done. HOW TO HANDLE THE WRONG PERSON When someone is the wrong person, they’re a cancer to your organisation. Even if you don’t see it on a day-to-day basis, they will kill your culture long term. Tolerating them in your organisation will cause great people in your company to become demotivated. They won’t work as hard when they see the poor behavior of the wrong person is tolerated, and ultimately they will leave your organisation. The challenge is that this person is in the right seat—and likely one of your top producers. You may feel like you’ve got to keep them, otherwise your company will instantly lose revenue or profit. Ultimately, keeping the wrong person will do more damage to the company over the long term. They may put the reputation of the company in question, other key people will leave, and too much time and energy will be spent putting out fires that this person caused. Always keep the greater good of the company in mind when faced with a tough decision like this. GET THE RIGHT PEOPLE IN THE RIGHT SEATS No company is perfect, but it is possible to get aligned with your team and overcome these two people issues. Get clear about your company’s unique definition of Right People, Right Seats. It will simplify your life, it will save you time, and it will make your business more effective, fun, and profitable. For more information about how the Entrepreneurial Operating System can help your business gain traction, visit www.eosworldwide. com/bfm. BFM www.businessfirstmagazine.com.au

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4 Reasons Your Company Vision Isn’t Shared Throughout Your Company Before a leadership team begins its EOS® journey, we ask each member of the team, “How aligned is your organisation around the company’s vision and plan?”

he average answer to that question is 4 on a scale of 1 to 10, and it’s not at all unusual for the owner (or company Visionary) to offer a score several points higher than anyone else on the team. FAIL-POINTS FOR SHARING A COMPANY VISION There are four root causes of the potentially fatal disconnect between the vision in your head, and what everyone else in the organisation is doing every day. 1) Your vision isn’t simple. As your organisation grows, it becomes more complex at the same time that you’re rapidly adding people and levels of communication. Great leaders use a few clear words that make sense to everyone, not lots of words and abstract concepts that create confusion and ambiguity. 2) You don’t all agree. No truly entrepreneurial company lacks vision; the real problem is that too often, each member of a leadership team has a slightly different view of where the company is going, and how it plans to get there. The only way to achieve agreement is through discussion, debate, and real conflict. If you and your team haven’t yet had any real conflict around your company vision and plan, it’s highly unlikely your team is 100% on the same page. 3) Your vision isn’t written down. Getting the vision and plan clear in your heads is a major accomplishment, but it’s only a start. Once you’re all on the same page (often after resolving some conflict), the next step is writing it down, using clear, simple words. A written document ensures that you all present the same vision and plan, appearing as one team, with one vision and one voice. You

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should also plan to revisit your vision each quarter to confirm and realign your team to make sure you’re rowing in the same direction. 4) You don’t repeat yourself often enough. Humans need to hear something seven times to truly understand and internalise it for the first time. When you get tired of hearing yourself talk about the company’s Core Values, Core Focus, and 10-Year Target, then you’re almost doing it enough. Because at the end of the day, a great leader knows her only job is clarifying, simplifying, and achieving the company’s vision through its people. When your people don’t know what the vision is, what your plan and priorities are, and how they can help achieve it – you’re just alone, spinning your wheels. These are four common mistakes. If you’re making one or more of them, there’s no reason to panic – it just means you’re human. It is possible to clarify, simplify, and achieve your vision.

It’s possible to instill discipline and accountability throughout the organisation, and to ensure everyone is consistently executing on your vision. Thousands of entrepreneurial companies running on EOS are proving it every day. For more information about how the Entrepreneurial Operating System can help your business gain traction, visit www.eosworldwide. com/bfm. BFM

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REALITY-CHECKING THE BUSINESS OF INNOVATION Brian Ruddle has focused on innovation for over a decade. It’s that experience and a penchant for the practical that sets him apart writes Leon Gettler.

rom raising cattle to raising capital, Brian Ruddle knows that a practical approach will get you closer to your goal, whether it’s a blue ribbon or a blue-chip client. The boy from Beaudesert now leads one of Australia’s most successful innovation and commercialisation specialist consulting companies. And although he swapped the farm boots for suits more than two

decades ago, that resourceful, problem-solving can-do attitude associated with growing up on the land has helped Brian ‘keep it real’ for his clients. After 14 years working on international development projects funded by the Australian government, World Bank, Asian Development Bank and UN agencies, Brian’s six-year stint with UniQuest, The University of Queensland’s research

commercialisation company, heralded his immersion in the start-up space. He saw a huge gap in service delivery for innovative companies and created Impact Innovation Group in 2006 to help them turn their ideas into significant income. Brian built up his commercialisation cred raising multi-million dollar seed rounds and negotiating licensing and joint venture deals with some of the

Brian Ruddle

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PROFILE| BFM

world’s largest multinationals. Now Impact Innovation is the go-to group not just for start-ups but also for SMEs, corporates, multinationals, government agencies, and not-for-profits wanting to transform their organisations. Impact Innovation Group is a team of experienced innovation practitioners and technology commercialisation specialists. Its ‘runs on the board’ come from focusing on putting clever ideas to work. It’s this passion for the practical and a collective century of experience that sets Impact Innovation apart from other consultancies. “We haven’t just done it once,” Brian says. “We haven’t just been involved in establishing one innovation system or getting one start-up off the ground – then claiming to be innovation experts. We’ve done this multiple times across multiple sectors and with multiple types of organisations. “We understand what it takes to deliver measurable outcomes. We know how to manage the risk and deliver outcomes from ideas. When organisations work with us they know they will get a return on their investment. “That’s the value we bring to the table. “It might be forming a sideshoot or start-up company from scratch, or designing an endto-end innovation system so established companies can decide what to do with the potential of their ideas. “Sometimes that means setting up workable collaborations with university researchers to develop new products or processes, or licensing intellectual property to a bigger player in the industry. We know how to talk to innovation managers and different types of inventors to generate mutual benefits from collaborative R&D.” Brian’s team is also just as comfortable pitching to C-suite executives and helping investors back the right technology for their portfolios. The key, says Brian, is implementation. Many companies don’t get that. They think it’s just about the idea. Or lots of ideas. “Too many people focus on generating or finding ideas, www.businessfirstmagazine.com.au

whether they’re large corporates or start-up founders. That’s why hackathons and idea competitions are so popular. But they forget about the execution and ROI. If you don’t focus on implementation and allocate resources to achieving those outcomes, you’ve wasted your money and time on brain gymnastics. That fun team building exercise will turn into a begrudging memory when your people realise their efforts were in vain. “We see this already. We talk to prospective clients who say ‘Yes, well, this is our third attempt at setting up an innovation program.’ They’ve shut down previous efforts because they focused on coming up with new ideas. They haven’t focused on getting outcomes to align with what the corporate strategy is trying to achieve.” Brian says he has met plenty of newly appointed innovation managers who have the technical specialisation but are still developing the skills to drive outcomes because they haven’t had practical, wide spectrum experience. And no textbook covers everything for taking an innovative idea to market successfully, because every in-house innovation or start-up addresses a different problem for different consumers. “Senior Executives and innovation managers are coming to us to help them develop the practical systems and processes to drive outcomes. We don’t provide ‘cookie-cutter’-type solutions because each system should meet the unique needs of the client. The purpose of innovation is to drive differentiation and growth – if your innovation system is the same as your competitor’s, then the chances of achieving these are slim. “We’re being approached by ASX 20-, 50-, and 100-type companies that have been doing the ideation work, but are now suddenly realising that if they don’t get their execution side of things sorted, they’re going to run into problems down the track. We work with innovation managers and their teams to establish progressive, sustainable innovation systems that add real and practical value.” This is why innovation is more than just about an idea or a technology.

While product, service and process improvement are generally the target of innovation programs, some of the most innovative companies in the world focus on their business model and come up with better ways of extracting or generating value from how they do business. Digital disruption is a good example. A lot of people focus on the technology side rather than realising that digital disruption is actually about changing business models. Companies that innovate need to have systems in place to maximise the outcomes. “We look at their systems,” Brian says. “If they can’t communicate their system for finding ideas, assessing ideas, developing those ideas and measuring impact, then it is not surprising that their innovation programs are not working – that’s where we come in. “Some organisations do have some of those elements. But until they take a systems approach, it’s very hard to communicate the value of investing in innovation, to build an innovation culture or to secure internal support.” A system to manage innovation helps to gauge when it’s time to step up. Impact Innovation uses various proprietary tools to help innovation managers understand where they’re up to with a technology or as an organisation. It’s also the Australasian premier partner for Brightidea, a platform designed to help companies harness the creative capacity of their employees to accelerate and scale innovation programs. It’s popular with companies like Cisco, Kraft, and Sony. The most innovative companies have the C-suite totally behind innovation. “Where we don’t see it going well is where boards don’t incorporate it as part of the business and they’re expecting the managers to go and do all the innovation,’’ Brian says. “Innovation is seen as, ‘Well, we’re not really clear on what the defined outcome is, therefore should we spend much money on it?’ which is a valid reason for not jumping in. But until they do bring it into the overall way of how they do business, they can’t be surprised when they only get piecemeal results.”

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So why do so many businesses fail to innovate? He says there’s a couple of reasons. The first is the fear of failure and a dislike for making mistakes. Unfortunately, when it comes to trying to implement new ideas, there’s a chance that they won’t work. “Within Australia, the fear of failure and risk-aversion in some sectors is strong. What most organisations don’t realise, however, is that you can reduce the risk of failure by having effective systems. For example, if you have processes to test ideas to gather information on their viability before spending a lot of money, you can make an informed decision as to what your investment should be,” Brian says. The second reason is that organisations aren’t serious about innovation. “What I mean is, they’ve got strategies around all other parts of their operations but we go to talk

to some of the largest corporates in Australia and we ask about their innovation strategy and they don’t have one. They don’t have innovation plans. They don’t have a properly thought-out innovation system. They approach it more from a ‘Well, we’ll give it a go and see how it works’ attitude,” says Brian. “Where we see organisations being successful is when they treat innovation like any other part of their business. There’s a budget around innovation, it’s got really clear KPIs and the board also regularly reviews the progress. Innovation is discussed at the board level every month or however often the board meets.” And while Prime Minister Malcolm Turnbull has urged an ‘ideas boom’ in Australia, Brian says many organisations just equate this with start-up companies and commercialising university research, rather than establishing their own innovation program. “Sure, some understand that

they need to treat innovation like any other part of their business,’’ Brian says. “The larger banks, some of the telcos, they’re creating internal innovation departments and they’ve got sizeable budgets around innovation and they’re getting their systems and processes in place. I suppose that’s the top level. Under that, it’s a smattering, if you like. Plenty of organisations talking about innovation, putting in innovation managers, and running one-off activities but it’s very, very early days.” He hopes there will be a shift. “In terms of the future and where we see things going, we’re hoping that organisations will treat innovation as being part of their business and really start focusing on the implementation side of things. The senior executives who establish practical innovation systems and processes, who focus on measurable outcomes, have the ability to transform their organisations – and maybe even their entire industry.” BFM

Discover smarter innovation solutions.

Delivering next generation product, service, process and business model innovation

Creating new products and services from ideas and technologies

Building capability to generate outcomes from ideas

www.impactinnovationgroup.com +61 7 3041 1128 info@impactinnovation.com BRISBA NE | SYDNEY | MELBOURNE | ADELAIDE | XIAMEN BUSINESSFIRST

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Generation Next: How the modern workplace can keep millennials happy, productive and content Take a look around the office. Chances are it’s brimming of millennials, a generation born between 1982 and 2002. By 2025, this generation is set to make up 75 per cent of the workforce, and their expectations of what the workplace looks like, the sort of work they do, and the types of companies they work for, differs significantly from earlier generations writes Stuart Craig, CEO, Crestron, Asia Pacific.

ow do you keep millennials, slated to be the most educated generation in history, involved, productive and engaged? This is doubly important when two thirds of them say their job is not their career, and many of them will not spend more than twelve to eighteen months at any given employer. SEAMLESS TECHNOLOGY For the millennial generation, technology is a way of life. Their smartphone is their conduit to the world, and they favour cross channel, cross platform experiences that provide consistent, fast and actionable data. This means an employer must view the mobile channel as the number one channel through which they interact with their millennial staff, and through which their staff accomplish their jobs. A key way to turn off a millennial? Engage the corporate social media police and restrict what they can, and can’t do, using social media channels. This is a generation where work and life is blurred – many millennials happily ‘friend’ their bosses on social media – and so the workplace must reflect their broader life experience. Old, centralised technologies, which involve sitting at a desk using a work issued corporate computer can’t keep up with the demands of this generation. Corporates must move their technology into a decentralised, cloud-based channel allowing staff to work where they want, and in the manner they want, generally using the smartphones and tablets they have brought from outside the office environment.

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MEETINGS ARE DEAD (AS WE KNOW) Top-down, hierarchical management won’t work with the millennial generation. They have grown up having had input into the way their families are run, and when they have hit university they are used to the easy, flattened way of doing things when working with lecturers and tutors. Interestingly, 71 per cent of millennials think that meetings are inefficient in deciding on a course of action. Dig a little deeper, and what this means is that the traditional meeting, where management presents a course of action, and staff are expected to act on it with little input, has fallen by the wayside. Millennials expect to have ad-hoc and on-the-fly meetings, where everyone gets to present an opinion, and where the best ideas rise to the top – much as they do in a university tutorial. In order to accomplish this new way of meetings, corporate buildings need to be much smarter than they have been in the past. Meeting rooms must be able to handle multiple wireless connections from personal devices into the AV system. Room bookings and confirmations need to be accomplished through a personal device, easily and quickly, with the booking status sent back to the personal device of the person booking the room and to the devices of the other invitees. Most of all, the smart building system needs to be flexible enough, and smart enough, to cope with adhoc meetings. Video conferencing with overseas colleagues must be seamless and as easy as pushing a button and making it happen. An added bonus is that smart building and AV systems can then

automatically adjust the lighting and shades, tweak the volume for the number of people in the room, and then automatically reset themselves and signify their ‘available’ status when the meeting has finished. VOICE CONTROL TO HIT OFFICE SPACES IN NEAR FUTURE As the workplace matures to deal with the millennial generation, new technologies that have arisen in the smart home will also come to the forefront. These ‘ironman’ technologies involve putting smarts into the rooms and built environments staff work in. In the near future, voice control will become increasingly important. Workers will want to accomplish tasks and obtain information simply by addressing the room – a scenario that sounds like it’s out of Star Trek, but is, in reality, only a few years away as the pace of AI gathers. Workers will expect the environment to feed them information they need as they need it, either through voice, or through a bot using a text messaging app on their device. Millennials bring special challenges to employers, and to the work environment surrounding them. With this generation expected to make up most of the workforce over the next decade, workplaces need to keep pace with their demands, or risk being left behind as the millennials come to the forefront. This requires new attitudes from management, and a new approach to the built environment if their needs are to be met. BFM

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SHAPING JUSTICE: how LexisNexis uses the rule of law The rule of law is not only critical to a peaceful and prosperous society, it also affects organisational practice and ultimately business success. Business First speaks with LexisNexis Managing Director Joanne Beckett about the rule of law and how it is used to bring about positive change.

exisNexis plays a critical role in supporting and advancing the principles of the rule of law – something which is not only imperative for business, but for society more broadly. According to Managing Director Joanne Beckett, the rule of law is a complicated concept and should not be seen as something abstract, as it has immense influence on our society. “As an organisation, we believe that the rule of law is the foundation of all other human rights, it is also a necessity for businesses to exist and succeed. We define the rule of law through four key areas.” First, is the fundamental concept of equality before the law. The right to view every person equal under the law. That is, “All people, businesses and governments are accountable under the law, and the law applies to everybody in the same way no matter who you are. No one is above the law. Whether you’re a citizen, a monarch, rich or poor, everyone should be treated the same way.” The second principal is a need for transparency of the law. “If you don’t know what the law is, how do you seek its protection? This principal is key to LexisNexis and the work we do to ensure that the law is clear, precise, current and accessible.” Thirdly is the importance of an independent judiciary. “An independent judiciary ensures that there is assurance of fairness that’s not tainted by bias and conflict. For example, politicians and governments make laws - and whilst there’s political influence at play – the judiciary

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remains independent and not subject to outside influence and apply the law fairly and without bias.” Lastly, there has to be access to justice and timely legal remedy. “You can have fair laws and you can have laws that are fairly applied. However, if you don’t have access or can’t gain access to those institutions that will uphold those laws and justice, then you have no remedy.” Ms Beckett, a former police officer turned lawyer, who joined LexisNexis in 2006 and worked through various positions until her appointment as Managing Director in 2015, says the rule of law is crucial for economic and business success and growth. She believes the more we advance the rule of law around the world and bring people within the umbrella protection of the law, the more economies will prosper and grow, increasing business opportunities. She refers to several studies that have shown there is a direct correlation between the rule of law and the growth of per capita GDP. There’s also evidence that the absence of the rule of law leads to economic slow-down, stagnation and decline. “One such body of work on this topic is the Rule of Law Index produced by the World Justice Project. The Rule of Law Index comprehensively analyses the strength of the rule of law in over one hundred countries across several key indicators such as fundamental rights, civil justice, absence of corruption and constraints on government powers. Each country is ranked and given an overall rating and regional rating,” Ms Beckett says.

Joanne Beckett LexisNexis leveraged its technology and expertise in content and data to further demonstrate the relationship between strengthening the rule of law and economic and social development around the world. By using the ratings applied by the Rule of Law Index, LexisNexis included economic and social data such as GDP, homicide rates and life expectancy and identified relationships and patterns emerging from the data sets. This data is presented in the Rule of Law Tracker created by LexisNexis which enables the user to visually identify the impact of the rule of law on economic and social development. The Tracker allows the user to scale up and down on the rule of law index ratings and see correlation to key economic and social indicators. “The Tracker enables users to calculate the effects that www.businessfirstmagazine.com.au

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improvements in the rule of law mean score would have on economic and social development. It’s quite clear from the data and relationships that the rule of law has an incredible impact on prosperity and growth,” Ms Beckett says. “Without equality and accountability under the law, clear and transparent laws, an independent judiciary and access to timely legal remedy, meaningful economic and business development is challenging. Citizens, institutions and foreign investors will suffer disproportionately without much reassurance that their risks are protected.” Could the rule of law also be the cornerstone for sustainable global development? “Projects like the World Justice Project and indeed our very own Rule of Law Impact Tracker clearly indicate that the greater the existence of rule of law in a country, the more prosperous it is with direct influence on economic

and social growth.” Technology has also had an impact in enabling greater access to legal information or documentation to enable greater transparency and access to the law. Ms Beckett cited a global app the company developed with the International Bar Association called EyeWitness to Atrocities as an example of technological assistance to help protect human rights. The app enables users to anonymously capture verifiable media evidence of human rights abuses and can be used as evidence in court. “We believe that this type of technology is transformational in its documentation of human rights atrocities. It’s a game changing app. It uses digital technology that helps human rights activists bring criminals to justice.” LexisNexis partners with various organisations around the world to actively advance the rule of law. In Australia, it has worked with the Human Rights Commission

to update and relaunch an online publication focusing on federal discrimination law and also developed RightsApp, which is a mobile app that consolidates several relevant UN conventions and declarations by theme and with country information. LexisNexis also partnered with the National Association of Community Legal Centres and the Australian Pro Bono Centre on projects last year that enable access to justice for people in Australia that may not otherwise have that access. “We provide high quality online legal resources to Community Legal Centres operating across Australia, which enables better access to justice for their disadvantaged clients that they assist,’’ Ms Beckett concludes. All in all, LexisNexis is about putting information and technology in the right hands to help shape justice and advance society. In doing so, it helps to advance society in a way that not only furthers the case for human rights, but also improves global economic viability. BFM

Expanding the umbrella protection of the rule of law

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The rule of law is fundamental to economic opportunity, political stability and social progress.

© 2017 Reed International Books Australia Pty Ltd trading as LexisNexis. LexisNexis, LexisNexis Red® and the Knowledge Burst logo are registered trademarks of RELX Intellectual Properties SA, used under license.

Find out how LexisNexis is empowering a global dialogue at lexisnexis.com.au/ruleoflaw.

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KEEPING AHEAD OF THE GAME

Melissa Hamilton has taken business process outsourcer Stellar in bold new directions.

n a fragmented industry that is facing constant disruption, Stellar is forging a new path – one that its clients have fully embraced. “We have built long-term lasting relationships with our clients,” Melissa says. “We invest heavily in listening to our clients’ customers and share this intelligence to drive new ways of interacting. We innovate and trial new technologies, new locations, new training methodologies and new processes with our clients. “We build partnerships focused on delivering win-win outcomes.” Melissa has over 20 years’ experience working with clients on customer contact strategy across multiple industries including telecommunications, utilities, travel & transportation and government. She joined Stellar in 1999 and has the third longest tenure in the company. As CEO of Stellar Asia Pacific, Melissa oversees Australia, Philippines and the USA, which means two things: her inbox is constantly full and she’s always on the road. An aeroplane for Melissa is her second home. Her working life is dictated in part due to technology transforming the industry. Melissa is making sure that Stellar is ahead of the game. “Digital change is already widespread, thanks to low-cost access to digital technology and social media. Businesses need to embrace this, as it comes with

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many positive opportunities to gain a competitive advantage.” Stellar manages digital channels for many of its clients along with the traditional methods, and has its eye on the near future in order to be ready for the next wave of emerging technology and demands. “We need to be ready for what’s around the corner; with projects looking into virtual reality and artificial intelligence in their early stages,” she says. “Seeing something go from an idea we come up with through to implementation is very rewarding. We’re excited about the rate of change in technology and in our industry, as it means we’re going to get that innovation buzz more and more.” The result: a company growing faster than the industry average. Over the last two years, Stellar has been growing at 15 per cent versus the industry average of 2 to 3 per cent, and is continually piloting new technologies with clients to maintain this strong growth. Stellar is a trusted partner with leading organisations across most industry sectors. With offices in Australia, Europe, USA and the Philippines, it has forged strong relationships with telcos such as Vodafone, utilities such as Simply Energy and travel companies such as Jetstar. Stellar also partners with government organisations and private organisations in healthcare, aged care, pharmaceuticals,

entertainment, tourism and education as well as not-for-profit entities. Through this growth, the customer experience evolution, for both Stellar and its clients, has been a shared learning. “When Stellar started, the offering was pretty simple,” Melissa says. “Clients engaged us to drive efficiency and reduce costs; starting with an Australian call centre, moving to offshoring in the Philippines. But now, our clients are asking us for guidance on the end-to-end customer journey across multiple channels. We’re taking our clients through an evolution process of how they talk to their customers. “We take a collaborative approach with our clients, working in partnership to discover what is best for their business. We then work with suppliers to plan, design, and deliver services and solutions. We aim to exceed the expectations of our clients and their customers. We don’t believe in selling a product we can’t deliver. We tend to be a little humble when we’re selling to a client, honest to a fault about what they can expect and when we can deliver it.” Melissa is passionate about innovation in a fast-moving industry and is looking for clients who want a trusted partner who will challenge the company to discover new ways of doing things. Much of Stellar’s mission is to innovate and be the first to try www.businessfirstmagazine.com.au

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Melissa Hamilton

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something new, often taking the financial risk on itself. “We have strong and longlasting relationships with most of our client-base, and we get great value out of seeing the evolution of our ideas. We want to build a solid foundation with a new client, learn their business inside out, to help realise even greater rewards.” She says the pace of change is now the big challenge for business. “I think businesses are even more aware of their customers today but in many cases are challenged with the pace of change and the changed customer expectations as a result. Sometimes they get distracted and end up too inwardly focused” she says. “Today, businesses need to do everything faster and more efficiently if they want to remain competitive in crowded markets.” Advancements in technology now mean Stellar’s customers are better informed and have higher expectations. They are also constantly connected – smartphones only arrived in 2007, but as Melissa says, her kids can’t imagine life without a smartphone (let alone without texting or the internet). Of customers, she says, “They have greater access to businesses, and they aren’t bound by 9 to 5 opening hours. They have a variety of channels they can use to get in touch with a company. They expect answers from the same channel they reached out through – Twitter then Twitter, email then email, webchat then webchat. “Most people research brands. They make purchase decisions online and take feedback from other customers on board.” She says businesses now find it harder to carve out the time and resources to discover the best way to communicate with their customers. The sheer number of channels and knowing how to ensure communication is seamless across them is very challenging; with businesses needing separate strategies across phone, mail, email, social media, text and live chat. “People know they can tweet at a company and get a quick response – or if the company fumbles it, they know they have a very wide audience to share the failure with. Some brands are not engaging

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across social channels, unaware of the potential brand impact of not engaging, let alone the lost opportunities to create promoters. “This has obvious ramifications for a brand, far beyond the damage that complaints mechanisms in the past would bring.” And businesses are struggling with it. In fact, Melissa says many businesses will be using the same systems for communication as they always have, unaware of changes in technology and industry that would save them money while improving their customer relationships. This is a problem. Accenture found that poor customer experience is costing Australian businesses $122 billion. At the same time, there are some basics about customer service that have not changed. “Life is becoming increasingly digitised, but at the centre of it, it’s still about people. In that way, good customer service hasn’t changed at all. It’s just the methods around the support that

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have evolved,” she says. “People are pushing too heavily towards digital when 81 per cent of people prefer to deal with human beings on service issues. You have to be careful about the balance and continue listening to your customers.” For Melissa it all comes down to the fundamentals of good customer service. Organisations need to remember customers and their preferences – know them and get better at anticipating when they need their suppliers – before they do. Melissa says that digital will be everywhere, but human touch will retain value. People will always be at the core. And this is where Stellar comes in. “This is what Stellar is all about,” Melissa says. “Our passion and our knowledge is all focused on our clients’ communication channels. We do this through figuring out the best mix for each client to use, and use our 18 years of experience to optimise the

implementation and then the dayto-day process. We take care of our clients’ customers over the phone, social media, web chat – as well as providing self-service options and back-of-house processes. “For the clients who want to keep things in-house, we developed our consulting branch, Stellar Evolve. We realised that we’ve built this incredible bank of knowledge across the end-to-end customer journey; and we should combine this with our consultants’ global experience to offer our clients a truly valuable product.” Melissa has made sure that Stellar has the right culture for this. In 2016, she received the Women in Leadership Award as part of the Australian Growth Company Awards. “At the core, we’re about people, and that will never change. I’m proud to be leading a company made up of a diverse and wonderful group of people who are all passionate about our clients’ goals,” she says. BFM

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FINANCE| BFM

New Year, New Business; Are you ready? Many new businesses struggle to make it past the first few years. Following a few simple steps could save your business from becoming another statistic writes Roger Mendelson, CEO, Prushka Fast Debt Recovery. deter your enthusiasm. However, for your business to succeed, there are a few steps you can implement which may save your business from becoming a statistic.

PLAN YOUR CASH FLOW

imited liability has been an important building block of the western world’s commercial system since its introduction in the UK in 1855. Starting a new business is an exciting time for any new business owner. It is usually the culmination of years of hard work, stress, investment and for many – a significant life achievement. But despite the highs, new small business owners quickly realise the complexities of owning a business with ABS figures revealing that approximately 60 per cent of new businesses won’t survive past the three-year mark. The latest Australian Securities and Investment Commission (ASIC) insolvency figures revealed that 79 per cent of businesses suffering insolvency last financial year were small businesses with fewer than 20 employees, with 86 per cent of failed companies having assets of $100,000 or less.

WHAT’S GOING WRONG? The ASIC figures reveal some crucial takeaways that can be applied to both new and experienced SMEs. The top three nominated causes of failed companies were inadequate cash flow or high cash use, poor strategic management of business contributing to downfall, along with poor financial control, and the lack of adequate records. While the rate of failure is somewhat startling, it shouldn’t www.businessfirstmagazine.com.au

The top reason for business insolvency is poor management of cash – so planning your cash flow is crucial. Monitoring cash inflow against outflows ensures you know where your shortfalls are, and can work to predict them, protecting yourself from slow periods. Then, when a slow period comes around, you will be prepared allowing for loans or keeping a surplus on hand. For example, for many SMEs, the post Xmas period is a period of poor cash flow.

SET AND ENFORCE PAYMENT TERMS Implementing a solid billing and debt collection system will help new small businesses form a positive habit, keeping in control of incoming payments, ensuring you stay on top of your finances. Set your payment terms for no more than seven days and ensure that you get invoices out promptly and follow them up regularly. If you are granting credit to business client, I can’t stress enough that you must have trading terms in place and enforce a 60-day payment cycle.

GET CONNECTED Poor financial control and strategic management is a major downfall for all businesses. Connecting and forming good relationships with professionals that support the direction of your business is key, working closely with your accountant, lawyer and bookkeeper means you can anticipate any major issues, allowing you to be better organised should something go wrong.

LOOK FOR WARNING SIGNS Don’t forget to look at the overall

financial performance of your business. As a new business owner, it’s easy to get caught up in the day to day goings on. While that’s important, it’s also necessary to take a step back and look at the bigger picture. Take notice of suppliers pushing you for payment, cheques bouncing, struggling to get credit – take this as a cautionary sign that something isn’t right and start making changes. A good idea is to monitor the bank figures daily, even if you have a book-keeper.

LOOK OUT FOR GRAVEYARD MONTHS February to March is what I call graveyard months. It is the time of year when SMEs really start to feel the effects of the Christmas slow down and it’s the most common time for businesses to enter a death spiral, which is very difficult to pull up from. B2B sales decline and combined with the Christmas shut down and increased holiday bill, it can leave businesses struggling to recover as debts finally catch up. Planning is key to surviving the graveyard months; have a clear idea of where money is spent and carefully consider where you can save money, whether it’s through discounting stock, following up invoices, or negotiating payment terms. All can help you avoid a dangerous time. Graveyard months are around the corner – new businesses are at a higher risk of failing to recover from the slow down than wellestablished businesses with wellestablished processes. Identifying that this is a critical time for your businesses is the first step. BFM Roger Mendelson is CEO of Prushka Fast Debt Recovery and principal of Mendelsons National Debt Collection Lawyers. Roger is also author of The Ten Mistakes Businesses Make and How to Avoid Them and Business Survival Guide, both published by New Holland Publishers.

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BFM | PROFILE

The commercial service model CBRE, the world’s largest commercial real estate services and investment firm, has seen exceptional growth both globally and through its Australian division over the last five years. Since 2011, the Pacific business has doubled with an impressive shift in business mix and increased diversity in the mix of people for its service lines.

Amanda Steele

oining CBRE Pacific in the middle of this massive growth is Amanda Steele, Senior Managing Director of the firm’s Asset Services business. With an extensive background in sustainability and roles with government and the not-forprofit sector, she has brought considerable strength over the last three years in creating integrated solutions across the environmental, social and economic spectrums. “I’ve loved the role – more than I ever thought I would to be honest,” says Amanda. “I’ve really enjoyed the challenge of running a big business and I’ve really enjoyed the challenge of working with such a great team and with world leading clients. “I’ve worked for the not-forprofit, government, and the corporate world, and have found all three fascinating and challenging in their own regard. They all bring a unique perspective and skillset that gives you a more complete approach to the next role. It’s given me a great platform to help drive CBRE now.”

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Amanda talks passionately about approaching business with a wellrounded attitude. Her experience in politics and public policies focussed on community development, which is how she was introduced to sustainability. Her approach to the work came from “the social side whereas many others approached it from the environmental side”. “I always run a very holistic approach to sustainability around social economic environment challenges and how to overcome them in different organisations.” While CBRE’s growth has been exceptional in recent years, Amanda is also quick to highlight that the broader industry is expanding and developing sophistication, heavily supported by technology and staff diversity. “The property management sector in particular has moved from manual to automatic – which increases things like building efficiency. If you think back not long ago, we used to have this guy with the jingly keys tied to his back pocket, however the technology peak means that we can automate

some of that work and direct the staff efforts into other areas. Now we have fantastic concierge staff that are waiting at the front to greet the workers to the building and really set them up a great day at work. It provides value to owners and occupants.” In doing so, CBRE now hires a more diverse group of people. As Amanda notes, the majority of staff for a property management business was traditionally linked to mechanical engineers; however the scope now includes the likes of sustainability professionals, executive chefs and wide-ranging concierge staff. “I think it’s allowed us to consult in a really great way,” says Amanda. “That integrated service at CBRE is really adding that value to our clients. They’re not just getting the leasing agents anymore; they’re also getting the evaluation team, and the asset management and access to our research. That’s providing a lot of value to our clients.” One such technological development is Pulse; CBRE’s property management system. The Pulse system includes all of the data that anyone would possibly need to understand their property portfolio, such as lease renewals, accounts, stacking plans and more. It is then translated throughout its business intelligence to provide bespoke information to make the clients’ lives easier. “I think it really improves areas of risk and opportunity across the portfolio and provides really clear insight,” says Amanda. “It gives you the time and the tools to allow you to focus on your investment strategy. The intent of the Pulse system is to take away the noise of property management, and provide the client with that high level investment focus portfolio. It gives you back your time, which everyone is short on.” www.businessfirstmagazine.com.au

PROFILE| BFM

Adding to the Pulse system is Aspire, which acts as a business intelligence platform that sits across the top to provide realtime reports that integrate with a range of different systems. It pulls together every point of data in a building or a portfolio to provide access in an easy actionable way. For example, it can be used to measure foot traffic in a shopping centre and present it in a format that is easily digestible. “We invest millions of dollars globally in technology every year, and we anticipate that we’ll be releasing new updates either to those platforms or to different platforms, every six months, within our business line,” says Amanda. “We have to remain valid in the current market place and technology enables that in a meaningful way.” While the technology provides great benefits to the client, Amanda is quick to highlight that customer service needs to be a focus in order to truly support their needs. It is an area of focus that she

has invested a significant amount of time and energy. “Commercial real estate didn’t traditionally put enough effort into customer service, when it really should be at the top of the industry. I think it’s really key to my leadership at CBRE, and what I’ve really instilled in our staff, is that we’re actually in the business of customer service. Property management is what we do, but we’re in the business of customer service and the better the customer service delivery, the more satisfied our clients are and the better our business flows.” In order to meet that level of service, CBRE puts its staff through training with MCA, whose clients include the likes of Disney. In addition to the specific skills in property management, there is a direct focus on delivering excellent customer service. “People are coming into the workplace now and wanting more than just a nice shiny office,” Amanda says. “They want people who can anticipate their needs and

deliver them in a really inspiring way. That’s what our property management teams do and needs to be a continual focus.” Naturally, this combination of technology and customer service works best when there is genuine staff engagement, and Amanda has put a lot of work into creating an inclusive culture where people want to come to work. It is an attitude that clearly reflects Amanda’s holistic approach – and one that she believes not just creates a more enjoyable workplace, but also a more successful organisation. “I really want to change the industry,” she says. “I know that can come across as arrogant, but it’s what we should all strive to do. I want CBRE to be so good that the rest of the property services companies are trying to catch up to us. I think there is a lot more head room on what we can deliver yet.” With such a complete and considered approach it would appear to be well on its way. BFM

BFM | STRATEGY

Are skills in execution of a strategy essential to succeed as a CEO?

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STRATEGY| BFM

Execution skills when building a business strategy can define a CEO’s tenure from mediocre to a masterpiece writes Ryan Makris.

oes a CEO who excels in the execution of a strategy from vision to reality succeed as a CEO in the business world? Planning, communication and listening are important skills for a CEO to have, yet execution skills deliver results and success. A CEO’s ultimate aim is to ensure his or her vision and the business vision align with the chosen operational strategy so that it is executed seamlessly, is fit for purpose, on time and budget. Harvard educated Professor Steven Kaplan from the University of Chicago Booth School said “Aspiring CEOs or corporate board members responsible for hiring decisions, data about leadership provide something novel to consider. The data-driven findings suggest execution skills are an important way CEOs set themselves apart from the pack. It seems plausible executives can improve execution skills, being persistent, efficient and proactive. Of all the skills a CEO require at their disposal, execution of a strategy is essential in transforming the vision into reality.” Research from Kaplan and Sorensen suggests a strong correlation between execution skills and success. Mike Schuman is the Executive Director of Transformative Consulting who has over 25 years global commercial experience across all industry sectors, building capability, teams and leaders. He said, “There has been significant material on the “gap” between strategy and execution. I instead refer to it as a “chasm”. It is not as difficult as some may think to bridge it. Some tools have helped me are listed below. • Business capabilities map: this simple tool allows you to visually demonstrate in a heat map

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fashion the core capabilities that drive your sector or organisation and how much budget is currently allocated to projects for each. You should then be able to show strategic alignment to the published corporate strategy and upcoming project pipeline. This will assist in project and budget prioritisation. • Workstreams: how do you eat an elephant? You’ve heard the saying. It’s the same with turning strategy into action. You must break down a strategy into streams of related work which can be further broken into supporting projects or initiatives. I generally find at least 6-7 streams is a good number (manageable). • Governance: all strategies which are seeking to move into execution should form a governance model with key stakeholders and at least a few evangelists to keep the energy going. There is nothing worse than a lofty document of motherhood statements with no clear path forward. Don’t let your work become the dusty relic with the pink bow wrapped around it which sits on the shelf. Even worse, somewhere down the road, someone will pay to do the same strategy work again because your document has been forgotten.” Research from Kaplan and Sorensen suggests a strong correlation between execution skills of CEO and success. Boris Groysberg Professor of Business Administration at Harvard Business School recently wrote: “Strategic thinking and execution – strategic foresight and the ability to think strategically, often on a global basis—was also frequently cited. One consultant stressed the ability to “set the strategic direction” for the organisation;

another equated strategic thinking with “integrative leadership”. Others emphasised the strategic thinking also calls for the ability to execute a vision, which one respondent called “operating savvy” and another defined as “a high standard in execution” One consultant pointed out the strategic thinking is a relatively new requirement for many functional C-level executives, and another noted the surge in attention to strategic thinking occurred in the decade 2000-2010. Leadership consulting firm Service Desk Coaching agrees with Kaplan and Sorenson and found listening to employee concerns about CEOs who struggle to bring a vision to reality, seamlessly diminish confidence and subsequently the business culture. This leaves unfinished projects which impact the business delivery model. A plan is great, but it’s the execution of a strategy which garnishes results. There is no point taking the business on a journey with no destination or purpose. Real estate has three proven rules to create wealth through purchasing property: position, position, and position. In business, potential employers look for one distinct quality in their leaders above all else which is commercially proven: results, results and results. No business hires executives to the c –suite without previous significant tangible achievements. Superior execution skills in strategy differentiate the executives who will add more value and purpose to the board, shareholders, suppliers, financiers and customers which drive continuous improvements in business. BFM

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BFM | PROFILE

LIW: busting leadership myths Henry Ford set out with the ambition to ‘democratise the automobile’ and today widespread access to the car has transformed society. Australian company Leading Initiatives Worldwide (LIW) now wants to do the same with leadership and LIW CEO Pia Lee is convinced that it’s the key to not only improving companies but society as a whole. Pia speaks with Business First about her own leadership journey from teacher to CEO and tells us why we should watch this fast-growing organisation.

y her own admission, Pia Lee has an ‘unusual background’. As a high school teacher in the UK in what she terms some ‘pretty tricky schools’, she learned a lot about human behaviour. ‘From locking the classroom to keep the children inside in inner city state schools, to handling stressed highflying private schools, to teaching international students, who two years earlier were at war with each other, that’s a good grounding in understanding what makes people tick’ she says. Yet given her next move, some may have questioned her own behaviour.

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After ten years working in the school system, Pia started thinking about her students and what became of them when they entered the business world. The trail led her to immigrate to Australia, where she literally had to start her life again. ‘I arrived in 2000 with no job and nowhere to live, but a passion to answer the question of what direction my students had taken’ Pia says. Perhaps to follow a trail you have to create your own path and that is exactly what Pia did. ‘My first job in Australia was working at the Sydney Olympics as a street cleaner which taught

me a lot in a short period of time. Being relatively invisible gives you the best opportunity to observe how humans behave around you. Sometimes that’s really disappointing.’ This led her to becoming involved with LIW, then a fledgling company based in Sydney, set up by three ex-army officers and which today is a thriving and ambitious leadership consultancy engaged with leading Fortune 500 organisations globally. LIW now operates in 30 countries across the world but when Pia joined, she was its first employee. Five years later she became a www.businessfirstmagazine.com.au

PROFILE| BFM

LIW CEO Pia Lee

Director and after a further six years, became the CEO. Pia has spent the last 16 years fully immersed in organisational leadership across the globe including studying a Masters in Organisational Coaching and Leadership to go deep into the background of a subject that has become her driving force. ‘It’s strange but I initially felt like a failure in that I wasn’t cut out to become a technical expert in life like a lawyer, engineer or doctor but later on I realised that I may have a place in supporting these technical experts to expand their reach and have a greater impact.’ These experiences and studies helped to form Pia’s views on leadership and they are refreshingly different from the norm. ‘There are a couple of myths about leadership that exist today that aren’t really useful,’ she says. ‘One of them is that leadership belongs to only a few leaders and the second is that those few leaders need to know all the answers. This really bowties the capability of an organisation around a few people rather than multiplying the efforts of the larger group.’ www.businessfirstmagazine.com.au

‘Over the 21 years that LIW has existed we’ve formed the view that effective leadership needs to exist at every level of an organisation and its focus is about creating the best conditions for others to achieve success. What we notice is that technical expertise becomes less relevant as you progress in an organisation and leadership becomes more important as the catalyst for enabling more to be achieved,’ Pia says. ‘Pragmatism is a key value for LIW. Our approach has academic backing but we keep it simple enough for everyone to understand. Leadership is about creating the conditions of success for others. Leaders need to develop real clarity, provide an optimal environment and build competence in their people so that they can achieve their goals. We always start with a simple question to our clients: What are you trying to achieve and why? This helps us to give a business the outcomes they’re trying to achieve.’ ‘If we are really clear what those business objectives are and we identify them for individuals as well as for the organisation, then we can plan and measure a more tangible change and identify the real impact that’s been made.’ ‘When we know what the direction is and what the leadership needs to be, we can then look at innovative ways to close the gaps in that organisation. It may be through coaching, development centres, top team workshops or enterprisewide leadership development programs.’ As well as clarity, good leaders build great climates where the culture enables success and the systems and processes including IT, performance management and remuneration help, not hinder, individuals. ‘The climate is really, really key. We need to understand the structure of the organisation; is it hierarchical? Is it silo orientated? Does it encourage cross-functional collaboration?’ The culture, as Pia indicates, is driven very largely by the leader’s example. ‘Research tells us that leaders have an impact of potentially 70% on organisational

climate through their leadership example and the standards they set. This leadership example is not always what it could be,’ observes Pia. ‘In fact there’s often a sizable difference between a leader and leadership – often we make the mistake that one will mean the other!’ It seems to be an approach to developing business leadership that is working. ‘Today, we have operations across the globe, but we’ve retained that core purpose as well as our values while constantly seeking new ways to add value to our clients. Every day there is a program where we are getting consistent personal transformations which are helping to shape the organisations that we work in and these are running from the shores of Tanzania to the floors of Silicon Valley. We’re seeing the fruits of that labour come through with a number of awards that we’ve won globally with our clients, particularly in the last two years and that reflects both the business impact and the strong partnerships that we have.’ The following diagram gives an indication of the problems businesses face and the way LIW goes about facilitating change, particularly in matters of leadership. LIW uses a four-step approach to help its clients deliver impact through leadership:

1. Design for impact - a pragmatic process to understand desired business outcomes, the specific leadership behaviours that will

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achieve them and the design that will unlock those behaviours. 2. Real work in the room – the immediate application of clients’ learning to a real business challenge which is aligned to the organisational goals. A typical program consists of 50% learning and 50% application with support from consultants. 3. Application support – LIW has a number of proven options for helping people to take their learnings back to the real world to deliver the organisational strategies. From Turning Learning into Action® phone coaching to manager and group coaching provided by LIW partner Lever Learning. 4. Impact measurement – a proven method to measure business impact using a combination of surveys and interviews to give broad and rich data. ‘There is a lot of work to be done to be able to measure the impact from a leadership program and how that directly impacts business outcomes,’ Pia says.

‘I think it’s really important that we partner with an organisation and that it is a joint process between the organisation and ourselves to be able to measure that impact. We’ll be looking at surveys. We’ll be looking at employee engagement scores. We’ll be looking at psychometric analysis that we might do before and after.’ Scaling the business requires planning. ‘It’s really important to maintain a consistent approach but also one that is the right cultural fit for the country as well as the organisation. We need to have the scale of a global approach but it needs to have that local feel. That’s really important because a number of our contracts are with multinationals where we are delivering leadership solutions potentially based in 10 to 20 countries around the world. We need to have that scale. We also need to have the practicality.’ Looking back through her life. Pia has never been one to shy away from a challenge. As she looks ahead, the next challenge

and opportunity is clear: to take leadership development out of organisations and into the wider world; in the spirit of Henry Ford, by ‘democratising leadership’. By 2020, LIW wants to have an impact on one million people. ‘That’s a huge number and to reach those people will require simplicity of message and new, low-cost approaches. Most people can’t afford to attend a traditional leadership program so we need to look to the digital world to make our ambition a reality. The exciting opportunity here is to do something that has never been done before: to use technologies such as machine learning and big data to enable anyone, anywhere to get things done together.’ Pia has a final call to action. ‘We can’t do this alone. We’re looking for people who share our passion for democratising leadership to join our quest. Given the challenges and opportunities at this time – there’s a lot at stake if we don’t.’ BFM

LIW is on a mission to democratise leadership. Join our quest by subscribing to bleets – 140 words of pragmatic, colourful leadership every week: www.liw3.com/bleets

LEADERSHIP STRATEGY, ASSESSMENT AND DEVELOPMENT

LIW

Leadership, not just leaders

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INNOVATION| BFM

THE MISALIGNMENT IN TECHNOLOGY AND INNOVATION If you were anticipating a global tech trend to jump aboard of, you might be waiting a little longer for your departure time, because when it comes to anticipating the best tech for their customers, businesses across the world all have their 2 cents to pitch in writes Bill Binch, ANZ Managing Director at Marketo.

imited liability has been an important building block of the western world’s commercial system since its introduction in the UK in 1855. There’s one thing they can agree on, though – that they’re ‘excited’ for new touchpoints. Respondents from Australia, US and Europe unanimously agree that emerging technologies such as AI, VR, IoT will serve as touchpoints that positively affect how they engage with their customers. But when it comes to deciding which of these technologies will out-perform the rest, there’s some discrepancies. When asked which technology they were most excited to adopt in the future, the majority of the US (38.6%) said predictive, but the feeling wasn’t mutual for the UK (7%) and Germany (4%), who both ranked this as the technology they’re least excited to adopt. A greater percentage of UK (9%) and German (11%) respondents actually preferred no technology, over predictive. So what are the UK and Germany excited for? VR, apparently. 26%

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of UK, 30% of German, and 23% of Australians claimed they were most excited to adopt the technology in the future. They may be excited to adopt it, but when it comes to anticipating the technology actually used by their customers in the next year, there was a different story to tell. IoT was rated as the tech most anticipated, with AR the least across the board. Same goes for which tech respondents were most likely to use in their marketing strategies; IoT the tech preferred by all, except the US who greatly favoured predictive over all else (69.5%). Don’t expect to see Europe adopting AR and VR into their marketing strategies any time soon; UK and Germany all preferred no technology over adopting AR and VR (17% and 16.8%, respectively). But what about when it comes to engaging customers, which is the best to use? IoT is still unanimously the most predicted in Australia and Europe, but the US still anticipate predictive to be the top technology to use to engage with their customers (56.8%).

It may be idealistic to desire a unanimous global tech trend for the sake of consistency, but at the very least, these markets should accurately match the technology with their needs. This survey reveals there are vast differences between which technologies businesses believe will work and what they actually will onboard. Australia and Europe both claim that better reporting and analytics to make sense of data is the one think they need most to successfully maintain customer relationships, and yet they fail to rate predictive technology as their preferred touch-point. IoT may be great for offering seamless omnichannel experiences for customers, but it will ultimately fail to provide businesses with what they claim they want. What businesses need from tech, and the tech they believe they need to achieve may simply not match. Maybe they’re caught up in too many trends? Maybe more transparency and understanding of what these technologies actually perform is needed instead. BFM

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BFM | PROFILE

THE BUSINESS OF RISK Every business in every industry faces risk which, in turn, can lead to an emergency or crisis that needs to be managed. How a business prepares for that risk – and handles the inevitable crisis – will help define it through its entire future.

Rick Stone

igertail Australia was established in 2010 by Rick Stone. It operates as a consultancy specialising in risk, crisis and emergency management – helping clients become resilient and capable of withstanding the demands of the modern, volatile world. “We think a resilient organisation is one that can cope with whatever the world throws at it,” explains Rick. “A resilient organisation can bounce back because its people feel empowered and trusted, and because they’re able to innovate and fix the problem.” This philosophy comes from a wealth of personal experience. Following some 10 years in the Navy, Rick joined the State Emergency Service in New South Wales as the training manager, where he successfully reinvented the entire training system and was heavily involved in strategic response management to significant floods and storm events across New South Wales.

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“It was a really interesting period,” he says. “I worked extensively across New South Wales as the head of the training system bringing it up to Australian National Standards and being a large part of the development of the national Public Safety Training Package, emergency risk management training programs and more.” From there, Rick moved into the position of Principal Planning Officer for the New South Wales government, taking responsibility for the State Disaster Plan, state-level specific hazard plans, providing guidance and input into national emergency plans, and high-level advice to emergency services and the government. Positions in training and strategy development helped Rick understand the true nature of emergency management and who carries out the work when a problem arises. It has helped shape the way that Tigertail approaches its work. “It’s the same in business. The chief executive or managing director rarely fix the problem – the people who actually do the work are the ones who fix the problem. If they feel trusted and able to be flexible and they understand where they fit in the big picture of the organisation, then they’ll fix it for you.” Importantly, Rick says that it can’t be a case of simply dictating what people should do in an emergency with a checklist. “It starts with getting the culture right,” he says. “You work on creating a culture where people know where they fit in. You work on building robust systems that are able to deal with unexpected changes. You work on planning for stuff that can go wrong and practicing those plans. When you get that right you’re on the path to a resilient organisation.” Of course, building the right

culture and plans are based on understanding what risk your organisation faces. Many businesses focus on potential global events which – as Rick points out – are incredibly difficult to predict and actually not very common. With Tigertail, organisations are encouraged to focus on local issues and build resilience that will cope with issues of an international nature as they arise. “We can’t predict what the next major shock is going to be,” he says. “If someone was to ask you what the price of oil will be in six months – and the effect that will have on your operation – you can’t say with any certainty. We can take an educated guess, but really an informed bet. But if you have a resilient and agile organisation then you will deal with that as it occurs. “So we work with clients to help them understand their risks and vulnerabilities – and just doing that builds resilience. For example, we all know that key people will leave the organisation at some point, so it’s good to be prepared for the consequences to the organisation. You know that you might have industrial issues; you might have issues of misconduct or malicious conduct; you might have illness; an epidemic or a pandemic. All of these things affect the people in the business – and they’re predictable. You don’t know exactly what it will look like and when it might happen, but you do know that it will happen in some form.” The same issues can apply to your suppliers, equipment, the regulatory system, and other matters that can disrupt your business and affect continuity. These issues are often neglected, yet have significant impact on all areas of the organisation. So how does Tigertail work with an organisation to help determine its specific risk? “It’s really about talking to www.businessfirstmagazine.com.au

PROFILE| BFM

people within the organisation and getting an idea about their appetite for risk,” Rick explains. “We need to build a complete picture of the organisation – including what it needs and what is doesn’t have – and then we can help it implement a plan that covers those areas. It is a very consultative process and it has to involve all levels of the organisation so that everybody owns their role and understands that they contribute to success.” By engaging the people in the organisation, Rick says they are in the best position for significant change and improvement. He refers to the ‘Four Ps’ of People, Processes, Plans and Practise as the secret to building a robust and flexible organisation, capable of dealing with risk and crisis. “Start with your people and you build the constructive culture that’s built around trust, flexibility and innovation and your people will carry you through,” he says. “If your people are committed to the organisation and the work that

it does, they are self-interested in the organisation succeeding. “To support your people, you need some procedures to guide them through the best course of action. Those procedures are rolled up into plans which talk about the big picture of how an organisation’s going to deal with the issues and the problems it might face. Then you’ve got to practise all of that so people are familiar with those plans and are able to enact the procedures. Ultimately, this will help develop trust in one another’s ability to handle the problem.” The strategy has proven to be successful for Tigertail, with continued growth in its six years of operation. Rick sees some great opportunities to expand through diverse industries and new technology, yet remains committed to providing a cost-effective and personalised service to clients. “I would like to think we accumulate high-profile clients by doing really good things for their

Simulations help refine plans and hone emergency skills business and by building strong relationships with them. I guess that half our work annually is repeat business. We’re pretty proud of that and the fact that most of our new clients are referrals. “Our philosophy has always been that we build a relationship with the client to help them to become more agile and build capability. It’s not about handing out checklists or forcing an organisation’s processes to fit the template that we used for the last one and the one before that and the one before that. It has to be personalised. Everyone faces risk – but everyone’s risk is different.” BFM

In our world, nothing is unforeseen. We help businesses, organisations and communities deal with risks, emergencies and crises Improve your organisational performance and minimise your risks Motivate teams and create a capable and resilient workforce through training and simulation Manage any interruption, enable quicker recovery and protect your reputation

Tigertail Australia, building resilient organisations that thrive in a volatile, uncertain and disruptive world.

Tigertail.com.au | 02 8097 1900 or 1300 987 772 www.businessfirstmagazine.com.au

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BFM | ECOMMERCE

BUILDING AN ECOMMERCE SITE THAT DRIVES LOYALTY Digital marketing has become a critical element of any businessâ&#x20AC;&#x2122;s overall marketing and customer engagement strategy writes Chris Stolke, Manager, Pronto Woven.

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ECOMMERCE| BFM

company’s digital presence and eCommerce site needs to be more than just aesthetically pleasing – it needs to be deeply integrated with the company’s back-end systems and information, to offer an incredibly seamless, personalised and easy experience for customers. Here, I’ll step through the benefits of harmonising your digital presence and business management software, so that sales truly sing. Traditionally, the number of visits and sales to an eCommerce website were the core goals of a digital marketing plan. Yet, as customer engagement platforms mature in the digital space, convenience and instant gratification are increasingly key objectives in marketing plans, both being proven as key drivers for a user experience that drives loyalty. Today’s consumers are digitally obsessed citizens that expect all services to which they subscribe to have an open communication channel, which allows them to engage at the push of a button. Companies with an online presence need to provide customers with a personal, accurate and timely experience from start to finish - not only when they purchase a product but also when they’re browsing, researching, asking questions or expecting delivery. Therefore, your eCommerce site needs to be sufficiently tied to your business management software system, tapping into real-time, relevant data from CRM, warehouse and logistics modules. Next, I’ll step through the key benefits a fully integrated eCommerce presence can bring to your business. SAVE VALUABLE TIME AND RESOURCES Integration of front- and backend systems will save time manually sending data from one source and into another, cutting administration costs and helping your bottom line. It will free your staff to think more creatively and innovatively on income-generating tasks that meet company objectives, and correspondingly help them feel more connected with the business strategy. www.businessfirstmagazine.com.au

ENHANCE THE CUSTOMER EXPERIENCE In days gone by, a customer would walk into a store, make a purchase and leave, and that would be the end of their interaction with your business. Nowadays, customers interact with your brand all of the time, and across a number of platforms. They might Google the category, peek at your website, and ask a question on your Facebook page before making a purchase. The interactions across all of these touch points result in highly valuable CRM data, which can be used to understand their customer journey, and the potential road blocks, problems or frustrations they may have experienced on the way. You can then learn from these insights, watch patterns, and make appropriate changes to improve the experience. Further, having a single source of collated information on each customer allows every interaction to be meaningful, which is more likely to end in a sale. Relevant data that allows a site to aggregate information in an appropriate, personalised manner, includes tapping into the customer’s shopping and browsing history, details on past customer enquiries as well as visibility into open or abandoned online shopping carts. If you don’t secure the sale this time, positive word of mouth is just as valuable. INCREASE THE ACCURACY OF YOUR INFORMATION You can lose a customer in many ways, and there’s often no easier way than offering them wrong information. For example, a customer loves one of your products featured on your eCommerce website, puts it in their cart, and pays. They are then told that the product is not in stock, and requests a refund. Or perhaps they arrange to collect a product from their local store through your website, and arrive to be met with blank looks from the salesperson. Integrating inventory, pricing and customer information can help ensure that what your customers see on your site is accurate based on real-time information, and they can trust

your brand. In the age of social media, a single poor customer experience can result in a highly public and negative review on your Facebook page or on Google. This can be damaging and disappointing when it isn’t a true representation of your usual, and targeted, customer service standards. ALLOW CUSTOMERS TO KEEP TRACK OF ORDERS When making a purchase online, a customer likes to see where it is and exactly when they can expect it. Integrate your eCommerce site with external services like Australia Post and you will be able to notify customers of when their product has been shipped, and allow customers to see their order journey in real-time. This will give them the security of knowing it’s on its way, and also help build their anticipation for receiving the new product. SAVES MONEY ON UPGRADES If you have an existing business management software system (ERP platform), you may be used to the process of upgrading it every few years, to ensure your system embraces latest offerings and capabilities. These costs can be particularly costly when there are multiple vendor owned systems at play. Integrating your systems with one vendor can save money on upgrades, as well as reduce the time and resources spent implementing these. While ha ving an eye-catching and easy to navigate eCommerce website is essential, it’s not a standalone element in your digital strategy. The objective of any marketing strategy is to maximise sales. An integrated, intelligent system that supports a website enables this objective to be met. An eCommerce website that effectively talks to your ERP and other systems, means that your customers will experience accurate, personalised and timely information on their purchases. It will ensure their customer experience is on-point during every interaction, enhancing their trust and loyalty in your brand. BFM

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BFM | PROFILE

HOW TO IDENTIFY AND NURTURE TALENT Don’t you wish hiring talent could be more like the reality television show The Voice? Potential candidates would appear before a panel of judges, and a few would advance to the next round of the interview process based on the audition. Next, you spend a few weeks coaching and developing the best candidates to make them even better.

DRIVE PERFORMANCE AND REVENUE IN YOUR ORGANISATION Can you imagine hiring sales and service professionals in this manner? Not only would it be a compelling show, but new sales professionals would hit the ground running and would be at full productivity in no time. Understanding how to identify and nurture talent is vital to any successful sales and service organisation, and it’s one of the best ways to increase performance and drive revenue. So, what if I told you finding talented sales professionals could be just as easy without all the pageantry of a television production? YOU JUST CAN’T TEACH TALENT Talent is reoccurring patterns of thought, feeling, and behaviour, and is an aspect of a person’s makeup that you can’t just learn. It’s something we have that is an innate and unique to

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the individual. These aptitudes cannot be created, quantified, or accounted for by training or experience. People either have a certain trait or they don’t. Many sales organisations approach talent all wrong. Typical interviews focus on job fit, skills, competencies, and experience. While it is vital to uncover these qualities during the interview process, it’s not the best way to find top talent. Sales leaders need to focus on identifying candidates’ innate traits – the things they naturally excel at – that will help them succeed in their sales career. Organisations that don’t focus on candidates’ inherent strengths are missing a big opportunity. Individuals are unique, so it makes sense that we all have unique gifts. Here’s what I mean: Adam AshleyCooper is one of the best rugby players in the world because he has specific talents that enable him to excel on the pitch. But those skills wouldn’t necessarily make him a top seller or service provider. UNDERSTAND YOUR PERFORMANCE OUTLIERS So, how can you find top sellers? First, you need to study your high performers, figure out what drives them, and find out the characteristics they all share. Then, you adjust your recruiting efforts to look for more salespeople with the same talents and traits. Once you find out what makes your top sellers – or outliers as they are known – great, you add skill development and a supportive culture (training) along with coaching, and you’re well on your way to sustainable high performance. Finding great talent starts with studying your outliers to determine the traits they possess that drive high performance in your unique work environment and culture.

When you have discovered the traits that lead to success, you can measure and hire for them. You do this by asking candidates specific questions to see if they possess these high-performing traits. The key is to ask the right questions. When you unlock the keys to identifying top talent, it can be magical for your organisation. Research from CSO Insights revealed enormous benefits when you hire the right people for the right position and put them in a nurturing culture. The research showed your people would:

19%

Work Harder

(increase in performance rating)

56% Stay Longer

(reduction in turnover rates)

Increased Revenue

34%

Perform Better

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PROFILE| BFM

WHAT DOES THIS LOOK LIKE IN PRACTICE? Recently, we worked with a Global Fortune 100 company study their high performers and determine some key traits they should look for in potential candidates for sales positions. We started by measuring everyone on their sales team so we could identify the positive sales-related traits each of them possessed. We discovered members of their sales team fell into three buckets: 1. Those with all of the positive traits; 2. Those with some of the traits; and 3. Those with none of the traits. Next, we studied the revenue generated against the quota for each group. To no one’s surprise, the group that possessed all of the positives traits we identified were two times more successful than those with only some of the positive traits, and three times more successful than those with none.

WHAT ARE MY NEXT STEPS? To find top Sales talent there are three core ideas to remember: 1. Find and study your outliers 2. Adjust your hiring approach to target the traits and talents of your top performers 3. Mentor and nurture these traits in your organisation We know this approach delivers results, but how can you be sure you’ve identified the right traits? How can you know if you’re tracking the right metrics to find the outliers? And how will you adapt your culture and work environment to foster these traits? For the last 7 years, Miller Heiman Group has been running our national Sales and Service Summit in Sydney where we explore these ideas with hundreds of Australia and New Zealand’s high performance organisations. The Summit attracts business leaders in Sales, Service, Marketing, Operations, Capability, Enablement, Transformation, HR and Learning & Development.

If you want to start identifying, acquiring, and nurturing top talents to sell more and service better, register for our 2017 Sales & Service Summit at www.millerheimangroup.com.au/ elevate2017. If you can’t wait until May 25th to discover how best to assess your sales and service team, contact Ty Southern of Miller Heiman Group on +61 400 649 641 or email Ty.Southern@millerheimangroup. com for a discussion on how you can select and grow the right talent to elevate your sales and service performance. BFM

Only 31% of organisations meet their sales goals. Discover how you can hire and retain the right talent to hit your revenue objectives at this year’s Miller Heiman Group Sales and Service Summit.

Early Bird Offer

$300 + GST

SAVE

$50

Ends 24 March 2017

Regular Price $350 + GST

2017 SALES AND SERVICE SUMMIT May 25, 2017 | Sydney Town Hall | 8.00am to 5.00pm WAYS TO REGISTER – Tickets are limited and in high demand. ONLINE: millerheimangroup.com.au/elevate2017 EMAIL: ANZevents@millerheimangroup.com

We take the business of sales and service seriously. millerheimangroup.com.au / +61 2 8999 9140

BFM | DESTINATION

Dip your toe in Fijian luxury As a holiday destination blessed with 333 tropical islands, there is no doubt that Fiji has become one of the world’s top tourist destinations. Take Likuliku Lagoon Resort, which, amongst its many accolades, was most recently named in the Top 10 Resorts in Australia & the South Pacific, in the uber prestigious USA Conde Nast Traveller list of Readers Choice Awards 2016.

ikuliku is top of the list of luxury resorts in Fiji. Here’s a couple of reviews: “Welcome Home” This place is like heaven on earth, the staff is so friendly and treats you like family. They welcome you with “welcome home” and this is exactly how you feel!!! The food is exeptional high quality and the accommodation peaceful, quit, and very beautiful. “Slice of Heaven” Likuliku is a little slice of heaven in the South Pacific! Amazing food, impeccable service from the

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friendliest staff, and of course the most beautiful lagoon setting! It cannot be faulted! “Something special” Likuliku Lagoon Resort is something very special indeed. Location, accommodation, service and the best cuisine I’ve had anywhere in Fiji, actually by one hell of a margin! Absolutely world class! Can’t fault any element of it. We booked into an Over Water Bure. Just unbelievable! Likuliku Lagoon is clearly well loved and much of its appeal can

be attributed to Group General Manager, Steve Anstey, who found himself in Fiji when he was approached to run Malolo Island Fiji, a family friendly resort, and to develop and open a new luxury adults-only property - Likuliku Lagoon Resort. “I came out for a site inspection and the journey began...” Steve says. Fiji is the perfect place to work for someone in hospitality. “In Fiji, hospitality comes naturally as it is part of the Fijian culture to be friendly, humble and hospitable. Service comes from the heart and there is a genuineness www.businessfirstmagazine.com.au

DESTINATION| BFM

environments that require strict environmental initiatives and practices to be set up and closely monitored and maintained whilst ensuring minimal impact. However, the environment is part of their charm and a good resort such as Likuliku Lagoon Resort must reflect that. “Each country brings with it different cultural attributes that one can either embrace or disregard in developing a new product. We were building a Fijian product with Fijian architecture and design...the service needed to be of international standard but with a blend of Fijian natural friendliness and culture. A sense of comfortable, understated and friendly formality - if that makes sense.” Anstey says he didn’t want to create a pretentious atmosphere, despite the luxury tag. It is not the Fijian way. Likuliku has a more rustic, barefoot, “toes in the sand” type of ambiance but with all the accoutrements of a luxury resort. Ahura Resorts is a 100% Fijian owned Resort development and management company and provides unique, relaxing and genuinely warm and friendly Fijian Island holiday experiences in pristine natural environments. Ahura uses “The Warm Heart Of Fiji” to characterise its brand, however the genesis is surprisingly

not Fijian. Ahura was an ancient Persian god who believed in the key principles of equality, care of the environment, charity, loyalty and faithfulness to settlement, tribe and country. These same values also happened to perfectly align with the values of the Fijian family company who own Likuliku and its sister property on the same island, Malolo Island Resort. “With the building of Likuliku Lagoon Resort we decided that we needed to introduce a brand to cover both resorts and any others that we may take on in the future. It forced us to examine our products and focus on what our core values were and what we wanted them to be including fairness, honesty and integrity and a commitment to Fiji, its people and the environment. Safety is also key to Ahura’s operations. “We have very strict policies and procedures in place to deal with emergency situations. “Being located on islands, people and especially families with little ones at Malolo, get understandably anxious and nervous when a cyclone is mentioned, so we take great efforts to make sure that our communication to guests is timely and accurate.” Our focus here is predominantly on Likuliku, so what sets it apart

there that I find missing in many parts of the world today. The Fijians who work in the resorts and hotels here genuinely love and enjoy what they are doing and this goes a long way in defining the end product.” Steve has been involved in luxury properties throughout his career and as well as managing properties, he has overseen refurbishment and pre-opening projects. His passion is in wilderness-style resort operations that offer unique experiences in remote areas. He says these operations by their nature and location, are more complex and diverse to operate than city or suburban hotels. They are more challenging but in Steve’s view, more rewarding. Resorts in remote areas generally need to be self-sufficient in their ability to generate their own power, water and handle waste products and they operate in pristine, protected www.businessfirstmagazine.com.au

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BFM | DESTINATION

AHURA RESORTS ENVIRONMENTAL COMMITMENT Operational environmental practices are part of everyday resort life with ongoing commitments to the preservation of flora and fauna, the land and the archeological sites through a range of initiatives, projects, procedures and recycling practices. Ahura Resort currently pursues four separate flora and fauna environmental projects. 1. They are active members of the Mamanuca Environment Society (MES) providing on going training and education to resort staff, guests and the village people in the preservation and caring for the marine environment. MES is involved in projects including Turtle conservation, coral transplanting, Crown of Thorns eradication and water quality monitoring. 2. In July 2005 the late Paramount Chef of the Mamanuca Islands declared the waters and reefs in front of Likuliku Lagoon and Malolo Resort a Marine Reserve or “Na Tabu”. This is an environmental initiative in partnership with the landowners to improve fish stocks and species and allow natural regeneration of reef and marine life as part of responsible sustainable tourism. 3. Dry Forest regeneration program. The islands of Fiji are home to the Dry Forest. Due to urbanisation these dry forest have been radically reduced over the years and it is now classified as one of the most endangered ecosystems in the world. Once all the island of the Mamanuca’s were covered in dry forest. Today only remnants of this ecosystem remain in small isolated pockets. Apart from the loss of the vegetation the dry forests are also

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home to a variety of animals who have also been affected with some on the critical endangered list and some extinct. These include the Fijian Green Crested Iguana (Brachylophus Vitiensis), Bolo snakes and Pacific boas. The forest are also home to a variety of bird life some of which are now extinct. A planting program has been set up to replenish affected areas on Likuliku Lagoon and Malolo Island lease with dry forest species and remove any introduced species or species that prohibit or limit the development and growth of the dry forest eco system. Ahura Resorts has set up its own dry forest nursery which is the only one in the country. 4. Fiji Crested Iguana Program. Following the rare discovery of two juvenile Fijian Crested iguana (Brachylophus Vitiensis) on the resorts early 2011 and another one 10 months later, Ahura now works closely with the US Geological Survey Team from San Diego, San Diego Zoo and Taronga Zoo in Sydney Australia who now visit the island on a regular basis and have helped set up an Iguana Sanctuary and breeding program based at Likuliku. This was an amazing discovery as this species were originally thought to be extinct on Malolo and were on the endangered critical list ICUN 2006. Finding these juveniles led Ahura to evaluate and set up the current dry forest reforestation program and also start a feral cat and rat eradication program. Four years after introducing these practices, the first Iguanas were seen during night surveys in the wild..

from other Fijian resorts? “Likuliku has the first and only authentic over-water accommodation in Fiji,” Steve says. “We take great care to ensure the product remains in excellent condition at all times and that we maintain the high service standards which we have set for ourselves” “Since opening in 2007 we have remained true to our food concept and our promise to deliver quality innovative food for our guests. If you’re offering an island experience make sure the food is outstanding. Our food concept was drawn up introducing dailychanging al la carte menus using as much local produce as possible and focusing on modern Pacific Rim cuisine. It was ambitious at the time but with the right Executive Chef we really lead the way in raising the food profile not only of our resorts but also in Fiji.” Our staff, who are the heart and soul of the resort, receive regular training to ensure international levels of service are provided. Many of them have been with us since we opened and they are immensely proud about what they have achieved, the awards that have been won and the accolades that have been received over the years and how we have sustained it. “What sets us apart is the unique blend of a stunning pristine location, outstanding accommodation and guest facilities, excellent cuisine, understated friendly Fijian service and smiles and a variety of interpretive land and sea based activities. These all work together to create an exclusive ambience that is distinctly Likuliku Lagoon Resort. “Consistency of product is paramount to success. You cannot sit back on your laurels for one moment.. New guests arrive daily with high expectations and we work hard to meet these expectations and exceed them where we can. Our high level of repeat guests is testament that we are doing just that, and winning the Best Overseas Resort award for five years running in the Luxury Travel Magazine Gold List Awards is indicative of the consistency and quality we strive to achieve in our product delivery.” BFM www.businessfirstmagazine.com.au

THE LEADER’S BOOKSHELF | BF

THE LEADER’S

BOOKSHELF

The Practical Guide to Selling with Emotional Intelligence Anticipated Publication Date: March 2017. Available: Apple and Kindle Sales and Marketing record holder, critically acclaimed author of: Marketing Works; Unlocking Big Company Strategies For Small Business, and celebrated Business Expert, Daniele Lima has in his latest book: The Practical Guide to Selling with Emotional Intelligence addressed the reasons as to why over 90% of all selling across the board fails to achieve its goal. “Most sales people whether they work in their own business or as part of a company generally have a high degree of technical skill in terms of knowing a lot about their product and usually that of theeir rivals as well. As well these same people are almost always highly trained in traditional selling skills and technique and despite this the vast majority of sales calls made fail to achieve a sale” states Lima. “Over the last ten years I have made an exhaustive study to identify why sales and business development people alike fail to achieve their targets and have identified key flaws in their selling skills technique coupled with a lack of applied emotional intelligence. Over the last five years, I have used this analysis and have outlined simply the essential steps to sucessfully selling any product in any market at any stage.” Daniele Lima has a formidable record of achievement having worked for over thirty years in virtually all areas of business in private, public, large and small companies; including Caltex Petroleum, Metrail and Bristol-Myers Squibb. He has excelled at every level having been a National Sales Manager, Regional Training Manager, Territory Manager and Senior Product Marketing Manager. He has won numerous industry awards and years later, still holds national and global sales and marketing related records. Lima is also the founder of the renowned, nationally accredited ‘Road Scholars’ sales and marketing training courses. All this expertise comes together in the The Practical Guide to Selling with Emotional Intelligence and sets a new standard for textbooks on teaching selling to modern day sales people. The author has written it to provide anyone wanting to achieve more in sales a simple, logical guide to combining proven sales techniques with the most modern and useful emotional intelligence principles that combine to provide true insight and help drive optimal performance and sales. The Practical Guide to Selling with Emotional Intelligence www.businessfirstmagazine.com.au

employs a step-by-step process of how each person regardless of experience, rank or market, can effectively leverage the same techniques used by Lima himself to grow the bottom line for their business. Additionally the book provides real life examples, succinct summaries and worksheet templates that can be easily incorporated into a sales plan. Destined to become a classic in sales training, it will give you the same edge that Daniele Lima’s large corporate clients enjoy. Daniele Lima is a sought after consultant to several multinational firms, author, key note speaker, certified pracising marketer and Fellow of the Australian Marketing Institute. He is also the founder and Managing Director of Road Scholars Training & Business Consultancy and holds individual national and global sales and marketing records as a sales man and marketer for his products. Daniele Lima’s first book: ‘Marketing Works’ published in 2006. (ISBN: 1-60037-009-8) Publisher: Morgan James Publishing, New York.

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BFM | HEALTH

TIPS TO BOOST YOUR IMMUNE SYSTEM Improving your immune system will not only help reduce the severity and number of colds and flus you get each year, it’s also been linked to staving off more serious issues like coronary heart disease, high blood pressure and diabetes writes Jo Formosa.

mproving your immune system will not only help reduce the severity and number of colds and flus you get each year, it’s also been linked to staving off more serious issues like coronary heart disease, high blood pressure and diabetes. When it comes to treating health issues, the biggest commodity for high-end executives is time – that’s the resource they have the least amount of. The key is being organised and having systems in place that work. That might be having things set up in a way that there are people to take care of you – this might be knowing where you can find healthy foods when you travel, getting a bone broth soup delivered to the office, having a receptionist make ginger tea and preorganising sessions with a personal trainer in the evenings. Once onboard executives are really good at taking care of their health as they are highly driven. The biggest hurdle is understanding what changes need to be made and the early implementation process. Here are some of the key areas which need to be addressed when looking to get your body working to peak performance: REDUCE STRESS It’s commonly known that stress wreaks havoc on mind and body – but until recently it wasn’t clear exactly how the stress influenced disease and health. Researchers at Carnegie Mellon University in the US found that chronic psychological stress is associated with the body losing its ability to regulate the inflammatory response.

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These findings are not surprising, and if the body isn’t regulating inflammation it can promote the development and progression of all sorts of diseases such as auto-immune, cancer, heart disease, rheumatoid arthritis, sinusitis and asthma. The first thing to do when stress levels rise, is find a way to downgrade that stress. I recommend incorporating activities into your weekly routine that take you out of the office, away from the airports and out into nature. Yoga is really great and so is mediation. The key thing is doing something which makes your breathing rhythmical and brings your heart rate down. This reduces pressure on your heart and solves other problems like anxiety, panic attack, foggy head and confusion; it also improves all immune responses so it increases your ability to combat disease. ADOPT A HEALTHY DIET A new study published in the Journal of Immunology, has shown that a junk food diet, high in saturated fat begins to harm our immune system even before the weight gain starts to show. Scientists from the Australian Research Council Centre of Excellence in Advanced Molecular Imaging found that the overconsumption of saturated fats may actually be a form of malnutrition that triggers the immune system to start attacking healthy parts of the body. A western-style high fat diet is going to impact your body’s ability to fight off attacking sickness – it’s not going to be working well if not fueled with the right foods.

In Ayurveda there are six tastes – sweet, sour, salty, bitter, pungent, astringent. A good diet incorporates a good combination of the tastes, however some more than others. Bitter, pungent and astringent tastes work to detoxify the body – so eat a lot of natural spices and herbs, vegetables, leafy greens and bone broth. These naturally detoxify the body and have you craving more of the nutrients that help your digestion work at its peak. The sweet, sour and salty tastes, while you can get them in good food, often tend to be what you get from takeaway stores and canned and packet foods. These are convenient, but not what your body needs. MAXIMISE SLEEP When the body doesn’t get enough sleep, cortisol levels are high and zinc gets depleted – you need zinc for your immune system to help you heal your body. While for many executives, like PepsiCo’s Indra Nooyi and Twitter’s Jack Dorsey sleep, is famously sacrificed in order to excel at work and still manage to have a personal life, this is not recommended in the long run. There never seems to be enough hours in the day, but not all hours count the same when it comes to sleep. The sleep between 10pm and 2am is the most important – this is when the body will detox the liver. So if you’re having late nights and not letting your body have a chance to do its natural detox process you’re stopping the machine from doing its job. Between 2am and 6am is when www.businessfirstmagazine.com.au

HEALTH| BFM

the by-products of elimination starts happening. If you wake up at 3am with your mind ticking, this is because cortisol levels are peaking in the early hours of the morning. To turn this around I recommend a neuro-tonic and doing some breathing exercises to reduce cortisol. WORK ON YOUR RELATIONSHIP The old adage, ‘happy wife, happy life’ is really fundamentally true. Happiness, or being at peace and feeling good about our environment at home makes a huge difference to health and immunity. I’m not talking about always being over-the-moon ecstatic, but at least content and peaceful. www.businessfirstmagazine.com.au

The quality of relationships around you – mainly with your significant other or children – can drive stress into your life, which if ignored, will come out in other parts of your body. As we’re told to continually lean in to work, push harder and achieve more it’s easy to chase the things that ultimately won’t keep us happy – or healthy – in the long run. The Harvard Study of Adult Development, quite possibly the longest study of adult life that’s ever been done – it has tracked the lives of 724 men for some 75 years – has some really interesting findings. According to Robert Waldinger,

the fourth director of the study, the biggest lessons aren’t about wealth or fame or working harder and harder. In his words: “The clearest image that they could get from the study are that good relationships keep us happier and healthier. Period.” EXERCISE EVERY DAY It doesn’t matter what you do, but just move. If you’re in a sedentary desk job, aim for one hour of exercise every day; do something that makes you sweat. Your body’s immune system is more powerful than many imagine – with a clear goal and dedicated action plan it’s possible to have it functioning at peak performance. BFM

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BFM | FAST LANE

The Lexus LC: A Dynamic Luxury Coupe In the space of just 27 years, Lexus has had a transformative effect on the world’s luxury car market. Engineering excellence has produced generations of powerful, responsive engines and transmissions, while its pioneering hybrid technology has taken efficiency and smoothness to ever-higher levels. Cutting-edge design and a contemporary approach to luxury based on master craftsmanship traditions further emphasise its status as a worldclass luxury vehicle manufacturer.

ow Lexus is building on its established strengths and evolving its reputation for vehicle development to explore new opportunities in design and technology that reshape its model range. Lexus has succeeded in turning its LF-LC concept into an uncompromised production car, in less than five years since its unveiling to huge critical and public acclaim. This feat has called for new ways of cooperation between the design and engineering teams throughout the development process. A FLAGSHIP COUPE The LC is a new flagship 2+2 performance coupe for Lexus’ global model range, not only showcasing the qualities of design, beauty, engineering and advanced technology that define it as a premium vehicle manufacturer, but also symbolising its ambition as a luxury lifestyle brand. The Lexus LC will go on sale in the US in Spring 2017 and will follow in Australia shortly after. The LC 500h marks a new step in the development of hybrid technology; it is the first model to benefit from Lexus’ Multi Stage Hybrid system. Adding a multi stage shift device to the 3.5-litre V6 hybrid powertrain helps transform the driving experience, witnessed in greater torque, more usable power across a wider range of engine speeds and rhythmic, linear acceleration that gives the driver the sensation of working with a 10-speed automatic gearbox. FRONT DESIGN The spindle grille itself – a hallmark of Lexus design – is finished in chrome and has an

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arresting new mesh design with visual tension that changes as it spreads across the front of the car. The unique LC lighting signature is created by independent daytime running lights in an arrowhead configuration and ultra-compact triple LED headlamp units. Achieving this remarkably slim headlight design played an important role in helping the designers achieve the coupe’s low hood and short front overhang. IMPROVED TORQUE AND ACCELERATION The success of the Multi Stage Hybrid System is central to the “even sharper” quality Lexus targeted for the LC, providing responsive, direct and rhythmical acceleration with good grip. In fact, such is the level of torque and acceleration when pulling away from a complete stop, the LC 500h tests the limits of tire grip and, according to Sato, is the first Lexus hybrid to spin its rear wheels. Lexus has succeeded in increasing maximum engine rpm from 6,000 to 6,600 rpm. And thanks to the Multi Stage Hybrid System, the operating range in first, second and third gears has been increased, so that maximum rpm is reached at about 50km/h (31 mph). TRANSMISSION WITH 10-SPEED FEEL Although the multi stage shift device changes the output in four stages, the D range has a simulated shift control pattern that replicates the feel of driving with 10 gears. As vehicle speed rises, engine speed increases with a linear, direct and continuous acceleration feel that avoids the “rubber band” effect witnessed in some continuously

variable transmissions. In the 10th gear range, the CVT control allows for cruising at lower engine revs for quiet, smooth and more fuelefficient performance. LEXUS SAFETY SYSTEM+ All versions of the LC are equipped as standard with Lexus Safety System+. The system uses a camera and a millimetre-wave radar to monitor the road ahead for potential hazards and collision risks. This provides the LC with a Pre-Collision System with Pedestrian Detection, which is designed to detect vehicles and pedestrians under certain conditions, All-Speed Dynamic Radar Cruise Control, Lane Departure Alert (LDA) with Steering Assist, a Sway Warning function, and Intelligent High Beam system (IHB). LANE DEPARTURE ALERT WITH STEERING Assist and Vehicle Sway Warning Lane Departure Alert (LDA) uses a camera on the windscreen to track the vehicle’s course between visible lane markings. If it judges that the vehicle is about to move out of its lane without the turn indicator being used, the system lights an indicator on the multiinformation display and sounds a warning buzzer. It will also apply appropriate steering control force to help bring the vehicle back within the lane. The system also includes a Vehicle Sway Warning function. If the system detects unintentional lane departure, it will sound an audible alert and display a visual warning (steaming coffee cup) on the Multi-Information Display (MID). This can adjusted by the driver. BFM www.businessfirstmagazine.com.au

FAST LANE| BFM

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