Inside Enterprise Issue 6: "Momentum"

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C ONT E NT S REGU L A R S New Ideas Trends in the Manufacturing Landscape Jenny Kang

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Challenges of Social Media in Humanitarian Aid

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Resources - The Long View Leonard Fung

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Student Story A New Way To Stay Qnected

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Shelvy Chandra-Tjing

Harmony Cheung

FEAT U R ES Constructed Dimensions: Virtually a reality?

Sandy Chen

Getting Off the Ground Recent developments in the commercial space industry Rebecca Johnston

The Robotic Renaissance Da Vinci and the rise of surgical robots Lyn Chen

The Power of Collaboration Strategic partnerships between brands Lina Stein

Is Planning to Fail Planning to Profit?

The paradoxical practice of planned obsolescence Vanessa Cartwright

The Next Boom or Bust Australia's innovation agenda Mark Jeyaraj

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INT EREST S Finding Wonderful Is it too late for Australian retailers to contest the international evasion?

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Australia cannot live without clusters It's official: innovation is a buzzword

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Jessica Smith

Cameron Bestwick

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The Harper Review Worth the hype?

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Telematics Driving down risk

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Gearing Towards The Future Property investment - Negative gearing in Australia

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Workspaces Worth Working In: The changing face of office design

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Eleanor Harrison-Dengate

Romilla Mohan

David Hogan

Chelsea Leung

INTE RVIEWS Interview with the founders of GownTown Ed Kearney & Matt Schiller

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An Interview With Sam Nickless

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The Asia-Australia Education Revolution An interview with Natalie Cope

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Joseph Shen

Rina Yang

Jonathan Soerjoko

ST U D E N T R O OM Financial Management Association of Australia

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Grad Mentor & the Financial Planning Student Group

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Alexander Orsmond

Arjun Sidhu

ENACTUS University of Sydney Tara Mahapatra & Doris Xu

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ONLIN E For many more articles and to contribute your own, visit www.insideenterprise.org

St ay con ne c te d www.facebook.com/insideenterprisejournal Tweet @IE_online

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Whatever you love or wherever your passion lies, the training and skills gained as a Chartered Accountant will help forge your pathway to success. It’s no coincidence that 99 of the top 100 global brands* have a CA within their ranks.

Find out how your degree can take you even closer to really loving your work at youunlimitedanz.com Copyright Š 2016 Chartered Accountants Australia and New Zealand. All rights reserved. ABN 50 084 642 571.This material is subject to our full terms and conditions, available at www.charteredaccountantsanz.com *Interbrand 2015 survey. 1215-21

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EDITOR'S MESSAGE Editor-in-chief Jenny Chen Deputy Editor-in-chief Erica Liu Directors Jenny Huang Howell Sze Marina Yang James Pyo General Editor Clara Wong Editors Edmund Zhang Angela Cartwright Cameron Bestwick Polina Nesterova Designers Erica Liu Anna Shen Campus Directors Richard Guan Mayank Mandal Matthew Zhou Board of Advisors Peter Corbett Hugh Simpson

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ith the constant shifts and challenges that are disrupting our business environment, momentum is required to achieve sustainable progress.

The sixth issue of Inside Enterprise focuses on stories of businesses and individuals who have harnessed this momentum to remain relevant and successful in our ever-changing business world.

Our writers investigate businesses that have adopted strategies such as planned obsolescence, customer-centric offerings and open-plan offices, and analysed the effectiveness of such approaches. They also explore the significant investments in research and development that are aimed at furthering our advancements in technology, resulting in the implementation of robots and virtual reality in commercial environments. In doing so, these articles demonstrate how maintaining the innovation boom might shape our future and one day allow us to achieve things beyond our imaginations.

The interviews in this issue reveal the boundless opportunities that arise from the momentum that has been triggered by progressive ingenuity. Sam Nickless, Chief Operating Officer at Gilbert + Tobin, talks about his career journey across different jobs and continents. Natalie Cope sheds light on Australia’s prosperous relationship with Asia and its role within the Asian Century. Ed Kearney and Matt Schiller describe the challenges that they had overcome when establishing their startup, GownTown, to then achieve considerable success within a short period of time. Ryan Chen and Daniel Liang share their Student Story of launching the social ticketing platform, Qnect, and discuss their visions for the future.

Finally, we celebrate the achievements and opportunities of organisations including the FMAA, Enactus University of Sydney and the Financial Planning Student Group.

As always, Inside Enterprise is a labour of hard work and devotion. It is the product of the passion of our dedicated writers, editors and executive team members, who I sincerely thank for their commitment. I would also like to thank our sponsors, both new and old, for offering their support to this publication. We deeply appreciate your generosity.

2016 marks the third year of Inside Enterprise. We will continue to grow across New South Wales and expand our inter-state operations, and thus look forward to hearing from students interested in getting involved. We welcome all students interested in writing, editing, or being part of the executive team. Information on how to apply is available on our website.

Jenny Chen Editor-in-chief

For advertising and sponsorship opportunities, please contact editor@insideenterprise.org

COPYRIGHT AND DISCLAIMER Š 2016 Inside Enterprise. All rights reserved.

The views expressed in Inside Enterprise are those of its contributors alone. Neither Inside Enterprise nor its Board of Advisors take responsibility for any material published. All pictures remain the properties of their respective copyright owners. www.insideenterprise.org | 5

NEW Ideas

Trends in the Manufacturing Landscape

Jenny Kang

WHEN THE FALL OF EURO AND RISE OF MANUFACTURING IN EMERGING MARKETS MEET

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he growth in Chinese manufacturing has recently slowed down dramatically. The new challenge for China and many other Emerging Market Economies (EMEs) is sustaining manufacturing sector growth while facing weaker demand from Western economies. This problem has been amplified by the tumbling euro, a traditional vehicle currency for many international trades.

EMEs comprise of 25 key developing countries, including Brazil, China, India, and Malaysia, whose combined share of global manufacturing output has increased from 44.6% in 2010 to 51.0% in 2014.

China unsurprisingly remains the world’s leading manufacturer by output, with total production accounting for 34.1% of global output in 2014, followed by India and Brazil.

The growth of manufacturing in EMEs has been driven by well-developed supply bases, open investment policies, rising innovation capacity and increased productivity. But the most important drivers have 6 | www.insideenterprise.org

been relatively cheap material and labour costs, which average US$3.30 per hour in EMEs compared to US$20.80 on average in developed economies.

This demand for cheap labour and raw material inputs has seen countries like Romania and Malaysia experience high levels of manufacturing, contributing 27.8% and 24.2% respectively to total GDP in 2014.

As a result of its importance, declining exports of manufactured goods directly threaten these countries’ economic growth.

Although manufacturing has boomed in many EMEs, rising wages, infrastructural barriers, political instability, skill shortages, weak global demand post-GFC and the recent collapse of the euro all result in increased turbulence and increased uncertainty in these economies.

The euro is a major vehicle currency for international trade, and recent currency volatility has had a strong impact on global manufacturing industries. Because the global manufacturing industry is highly price sensitive, the major advantage EMEs

possess – low labour and raw material costs – may be easily wiped out by currency risk and volatility. The labour wage advantage of EMEs may also be eroded if European real wages continue falling. Under either of these circumstances, manufacturing output and capital investment may shift away from EMEs towards European economies or economies whose currencies are pegged to the euro. These countries also possess other benefits including skilled labour, established institutional infrastructure and proximity to consumer markets.

The shift away from agricultural economies towards industrialised economies is key for EMEs to move along the economic development process, especially since the full economic benefits of manufacturing have yet to be experienced. Whether it is machine capability, appropriate legal structures or skilled labour, EMEs tend to have a common lack of institutional structures to complement the industry. This could contribute to the decline in the EMEs’ share of global manufacturing.

There are several options that EMEs can take to start reaping the full benefits of manufacturing. Improving resource productivity and building research and development capability, especially in product design, are top priorities for EME manufacturers. Investment in revolutionary technologies such as 3D printing, nanotechnology and cloud computing are important ingredients for enhanced productivity. This option is by far the most costly commitment, but is necessary to address the threats from the falling euro and declining European wages.

EMEs should also take advantage of demographic changes in emerging markets, which are fuelling greater demand for finished goods. Given their specialized geographical knowledge and lower transportation costs, manufacturers in EMEs should focus on expanding in these emerging markets, ensuring sustainable growth into the future. ■

Challenges of Social Media in Humanitarian Aid

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ver the past decades, the shape of the humanitarian sector has changed greatly. Trending Facebook posts and the latest hashtags on Twitter reveal the prominent use of social media in communicating a cause. Sharing information is not a new concept, but the speed of social media has allowed humanitarian causes to be communicated a lot more effectively. Real-time information matters in a humanitarian crisis. Harnessing the potential information revealed by social media has become crucial to humanitarian operations, with most aid agencies already using the latest techniques in brand and market research. These include promptedawareness surveys and name-recognition studies to neatly shape and refine public perceptions of the agencies in the countries where they raise funds.

The ‘peer-to-peer’ nature of social media makes humanitarian work appear more direct and personal. Campaigns such as the ALS Ice Bucket Challenge and Save the Children’s ‘Most Shocking Second a Day’ videos are examples of highly successful advocacy that reframed major humanitarian issues to sit at a more personal level.

However, the overall effect of social

media campaigns on humanitarian causes is questionable. The refugee crisis in Greece, the ongoing crisis in Yemen, or the alleged slavery abuse in Qatar have certainly not been alleviated by social media campaigns. And therein lays the problem of social media campaigns. A slick video, with a simple message and the option to purchase goodwill, usually suppresses the complexity of the problem.

The danger of mass campaigns is that they deliver an oversimplified story line, where rudimentary reactions from the public are expected to make the problem evaporate.

While social media is becoming more and more central in raising awareness of humanitarian operations, it cannot supplant actual aid operations. During the cholera outbreak in Haiti, information awareness was not the problem as text messages and warnings were sent out to mobile users in outbreak areas. Rather, it was the inability of the aid system to deliver safe, clean water and treatment clinics that exacerbated the outbreak.

Even in the midst of crisis, it has become normal for people to communicate through social media. The volume of information produced alongside

Shelvy Chandra-Tjing mainstream media has allowed people to switch from TV screens to phone screens effortlessly. This was evident during the Hong Kong civil unrest in 2014. A flood of ‘citizen journalists’ emerged, whereby ordinary citizens reached out on platforms such as Twitter, Facebook, and Reddit to provide live-feeds, testimonies and pictures that mainstream news sources did not have access to.

There is enormous potential for social media to become the lifeblood of humanitarian operations, but translating information and awareness into meaningful action has its challenges. Social media has blurred the line between information and misinformation. In citizen journalism, the issues of source and data trustworthiness highlight the lack of quality control, verification and sustainability that mainstream media provides.

Ultimately, the effectiveness of social media as a tool in humanitarian action lies not only with the speed of spreading information, but also in the open nature of information. It should not be assessed by its fundraising potential, but by its impact on the quality, relevance, and effectiveness of aid. ■ www.insideenterprise.org | 7

Resources – The Long View

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he backdrop of weakening industrial output in China, narrower profit margins and an iron ore glut has created a strong downtrend that has culminated in many investors shunning the resources sector. Nevertheless, the recent uptick in resources stocks, caused by a surging iron ore price, has led analysts and investors alike to question whether the momentum driving the commodities bear market is coming to an end.

Four structural factors worth considering

Chinese demand Between now and 2050, China is expected to move almost half a billion people into its rapidly growing cities. According to IMF projections, the estimated cost of constructing the infrastructure required to accommodate this demographic shift is close to US$15,000 per person.

This means that China may need to spend US$7.5 trillion on infrastructure over the next few decades, providing strong longterm growth in iron ore demand.

Emerging manufacturing powers With the cost of labour in major Chinese cities rising rapidly, companies are relocating low-skilled manufacturing work to even lower cost destinations within Asia. This trend has resulted in the Vietnamese economy growing at 6.7% in 2015, while the Filipino economy grew at 5.8%. Both these growth rates, if sustained, will provide a compelling base to support the economic development of these countries. Sustained economic 8 | www.insideenterprise.org

growth will provide additional demandside support for commodity prices.

The Big Three BHP Billiton, Rio Tinto and Vale have all adopted market share strategies, committing to producing a record output of iron ore in the face of weakening international demand. Slower demand growth stems from China's transition to a service-based economy, as well as broadbased weakness in emerging markets growth around the planet. Nevertheless, the demand for commodities is still likely to be robust, due to the demand for infrastructure required to serve China's rapidly growing urban population. Furthermore, exploration activity across the sector has declined dramatically. In past resources cycles, declines in exploration activity are generally succeeded by commodity price rises and strong gains in mining stocks.

Smaller miners Current price levels for commodities have squeezed the balance sheets of smaller cost miners, most of which are currently unprofitable. Should iron ore trade around US$40/tonne, ASX-listed small cap miners will likely need to embark on either debt or equity raising to avert bankruptcy before the end of 2016. With investor sentiment at extremely low levels, bankruptcies amongst smaller miners remain likely, making smaller miners a high-risk investment proposition. Nevertheless, this risk has mostly been factored into stock prices, and smaller miners are thus likely to provide the largest returns in the event of a more immediate upturn in

Leonard Fung

commodities markets.

The future of resources Should iron ore prices recover to levels last seen in the mining boom, one could assume that profits would hit even higher peaks. The Big Three miners now have lower production costs and will almost certainly leave this current commodities bear market with even higher market share. As such, common stock in companies such as Rio Tinto may well be trading at five times what earnings will be in a few years’ time. Assuming a PE ratio of 15 to be acceptable to investors in a resources boom, as has been the case in past upswings, resources investors may well be able to look forward to stocks tripling in value over the next cycle. Mining stocks could thus provide a significant wealth boost to investors who have the patience, ability and inclination to buy and hold resources stocks.

While the long-term outlook for commodities remains strong, many investors are staying out of the market primarily due to fears of further falls in stock prices.

In the short term, it is hard to be certain whether the momentum has shifted permanently. It does appear that the worst of the downtrend may be over, and signs of a consolidation phase within the sector may signal the start of a longer term uptrend, and by extension a new commodities cycle. While the recent rally may be overdone in the short-term, it is still worthwhile following mining stocks closely as they may prove to be an attractive longterm trade over the coming months. â–

Student Story

A New Way To Stay

Qnected

By Harmony Cheung

Student entrepreneurs Ryan Chen and Daniel Liang established social ticketing platform Qnect to help unify audiences of all kinds. Their app and website allow users to buy and sell tickets to events, and offers event organisers the freedom to easily create their own ticketed events. In just a few years, their business has steadily gained momentum domestically and internationally, and their team is currently in the midst of creating new features for their app. Built on a philosophy based solely on meeting the needs of people, Qnect is a business that is 10% social ticketing and 90% networking.

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What is your proudest moment to date in your journey with Qnect?

R: We entered this competition called the PolyU Innovation & Entrepreneurship Global Student Challenge in Hong Kong, where we competed with 24 other universities from around the world, and met many smart minds and inspiring students. This was the single most important event for our business. On the night that the winners were announced, the first name to be called was Qnect. Our entire team jumped up. For me, that was the happiest moment in the history of this business so far.

D: I don’t think we would have had the confidence to defer university and work on this full time if it weren’t for the support from the competition. For me, the proudest moment was this year’s O-Week. We went to eight universities across Australia. Being able to connect with students and have them put on our shirts and spread the message to societies all over Australia was the moment we realised we could create something bigger.

You’ve evidently gained a lot of momentum through engaging with Australian universities during O-Week this year, as well as the competition in Hong Kong.

Are you looking to expand globally at this point, or is this a long-term goal?

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R: The way that Daniel and I picture it, it has been about going global from day one. People all around the world face the same problem. People are social creatures. That philosophy really drives us. Whether it is in Hong Kong, Singapore, China or Taiwan, there is always the problem of organising events and not knowing whether or not your friends are attending. Our product addresses this problem globally. It isn't a problem confined to Australia.

The beautiful thing about being in the tech business in the 21st century is that going global isn't hard anymore. Products are built and scaled to address universal problems. With a few changes and some strategic development, you can bring your product to other markets and replicate what you've already done in the market you're currently in. If you've achieved success in one market, it is incredibly likely that you'll achieve success in another market in the tech field.

D: The only difference is adapting to the culture. Our product is built more for Western cultures, whereas in cities like Hong Kong, the issue of event attendance isn’t as significant as people want to go out all the time and connect with friends and meet new people. They also seem to be drawn to animated material. That's what captures their attention so we need to adapt to that.

What is one piece of advice that you wish you had received before embarking on this Qnect journey?

D: Choosing the right team is the most important thing because you're going to be working with these people every day.

Right now we have a strong team and everyone adds value in their own different way. You should pick a team that you not only want to work with, but also want to work for.

R: For me, it's simply to never ever give up, or even have the thought of giving up. There were so many times when we believed we were one string away from not making it, whether it be a competition, not getting a customer, or not getting financing from an investor. Many great entrepreneurs out there like Steve Jobs and Elon Musk were 48 hours away from bankruptcy at some point in their company's history. This teaches us all a lesson – no matter how close you are to what appears to be the end, it is your ability to push through that one moment that separates you from everyone else.

Qnect seems to have a strong social media presence. To what degree do you think you owe your success to social media?

R: I'll be completely honest - I don’t think the period of time where we can largely owe our success to social media has come yet. The stage that we're at right now is pushing the product and getting our initial customers. We're improving the product, building the team. There's an inflection point in every business, where everything just explodes. I think it's at that point, when you have perfected the fundamentals, where social media will really drive business growth.

build a product for the tourist industry. Furthermore, the R&D tax incentive of $20,000 allowed us to build the algorithm that provides events to people. We're very grateful for all of this support. Along the way, you meet many different people who have their own unique stories. The best way is to listen to them and if they want to join us on our journey or invest in our product, they can then become another resource. As people come together to support your idea, your resources multiply.

R: There's always a bit of luck that plays into it - the people you meet, the situations you get into and the kind of competitions you win. However, at the end of the day, I realised that you tend to end up with people who are likeminded. You get into situations that you want to be in in the first place.

At University, there are a lot of resources in terms of mentorship, startup competitions and programs that you can really use to help build your idea. I think University is really an ecosystem, where communication and idea-sharing makes innovation possible because you are connecting with students, mentors and lecturers who share the same passions. These are the seeds from which you can grow and consolidate your ideas.

Going out into the world, mentors and investors are up to you to find, whether it’s through referrals or platforms such as LinkedIn. Once you do have the right people working with you, momentum builds up and more people will believe in you and your product. At the very beginning, the passion comes from within. It's up to you to rise to the occasion and attract people with your ideas. ■

What's your long-term vision for Qnect?

R: I think Qnect is relevant to any situation where people go out with their friends. The kind of markets that we are targeting right now are university societies, concerts, music festivals and nightlife events. This is really just the beginning. In the future there is so much potential outside of that such as sports events. In particular, video games such as League of Legends are gaining a substantial following in eSports, where people go inside stadiums to watch tournaments between professional players.

D: From societies at university to personal events or large corporate occasions, our product is built for people to create any type of event. We feel that event organisers are often quite disconnected from their audience. As the intermediary, we share the common interest of unifying the organisers and their audience, so that they can stay much more connected and engaged.

Many entrepreneurial projects or ventures often require a lot of financial resources and expertise to really take off. How did you acquire the tools necessary to achieve your current success?

D: This is our first time trying anything like this, so in the initial stages we weren't really thinking about things such as raising capital. We just wanted to build our product, and the only way to do that was using our own money and time. We got some help from the government in the form of a $15,000 grant to www.insideenterprise.org | 11

IS PLAN N I NG TO FAI L PLAN N I NG TO PRO FIT? The paradoxical practice of planned obsolescence

By Vanessa Cartwright

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n the modern developed world, we in- many of us realise. In 1928, trade magazine of printer ink runs out, prompting an alert creasingly rely on objects to strengthen Printer’s Ink warned its readers that “an ar- to replace the entire cartridge, even if the our identities and self-esteem. Millions of ticle that refuses to wear out is a tragedy of other colours have yet to be exhausted. lives revolve around borrowing money for business.” In 1932, American economist It is now standard practice for companies more and more purchases of debatable ne- Bernard London wrote the famous paper to plan obsolescence into their products. cessity. Longstanding sources of identity, ‘Ending the Depression through Planned But is planning to fail really planning to such as a relationship with the land and Obsolescence’. He proposed that planning profit? When Apple launched the iPhone close community connections, are being a short lifespan for every product produced in 2007, its product was so innovative that traded for a lavish consumerist identity. would increase demand, employment and the possibility of the company producing Unfortunately, congovernment income. parts with poor durability was hardly distinuous consumption Despite the initial cussed. However, over the last few years, the bears little correlabacklash, London’s company has faced stiff competition from “the desire to own tion with happiness. vision has gradually Samsung and other players, which should This is partly because become a reality. The in theory disincentivise the profitability of something a little much of what we buy term ‘planned obso- planned obsolescence. “Buyers are smart, merely replaces faulty, newer, a little better, lescence’ was popular- and if they start figuring out that one of unfashionable or obso- a little sooner than is ised during the 1950s the costs of buying Apple’s products is that lete items. The useful by industrial designer they’re constantly nickel-and-diming you, necessary.” life of consumer goods Brooks Stevens. He they’ll switch,” University of Chicago Prois becoming shorter, defined it as the act of fessor of Economics Austan Goolsbee tells even as technology instilling in the buyer The New York Times. Nonetheless, if conadvances. Is this paradox fuelled by a con- “the desire to own something a little newer, sumers associate moving to a new brand spiracy? And are consumers complicit? Pro- a little better, a little sooner than is neces- with large switching costs, companies like testers against planned obsolescence would sary.” Stevens was a well-known promoter Apple could still be encouraged to practise answer “yes” to both of these questions. of desire obsolescence, the psychological planned obsolescence.

Planned obsolescence is a business strategy process where the lure of the latest looks in which a product is deliberately built to makes our current possessions seem obso- Consumers: caught out and become obsolete – that is, unfashionable lescent. Desire obsolescence took off during complicit? or no longer usable – within a relatively the 1950s with the expansion of fashionable Many companies clearly feel there is “an short timeframe. This strategy aims to make consumer goods such as cars and household upside in having built-in obsolescence,” consumers purchase replacement products appliances. In the 1960s, social critic Vance reports Professor Gerard Goggin, Profesfrom the same company. Many of us are in- Packard distinguished between desire ob- sor of Media and Communications at the herently familiar with – and frequently en- solescence and design obsolescence, which University of Sydney. He points to manusnared by – planned obsolescence. We only he called obsolescence of function. In desire facturers using cheaper components in their have to think of textbooks being marketed obsolescence, the comproducts and experias brand new editions despite exhibiting pany persuades the menting with differonly minor changes, or Apple constantly buyer to acquire a new ent plastics to achieve “an article that changing its charger designs to secure the product; in design obquicker product turnopurchase of new chargers with new Macs. solescence, the com- refuses to wear out is a ver. Consumers, howIf you want to know how long a new phone pany forces them to tragedy of business.” ever, can also be comwill last, the joke goes, just check the war- do so by designing a plicit, particularly in ranty’s expiration. short-lived product. perpetuating planned obsolescence in the Lasting a short while: a long time Tech Titans tighten their clutches mobile phone market. Goggin emphasises in the making With the technological innovations of the the “novelty” of mobile phone culture, and The concept of the Product Life Cycle has Information Age, two new forms of planned “the conspicuous consumption phenombecome “a modern euphemism for planned obsolescence have arisen. The first is sys- enon – an intersection between the phones obsolescence,” suggests the 2010 documen- temic obsolescence, which is the launch of being fashionable and people increasingly tary The Light Bulb Conspiracy. The docu- new parts or products that are incompatible wanting to have a new phone regularly.” mentary’s name was inspired by the Phoe- with previous ones, creating user difficulty Kipp Stevens, son of the famous planned bus cartel of light bulb manufacturers that that renders the older items obsolete. This obsolescence supporter Brooks Stevens, operated during the 1920s and 1930s. The can happen when software updates result in claims that “planned obsolescence is abcartel members had a light-bulb moment older devices working very slowly, missing solutely at the consumer’s discretion.” If when they realised that making their tech- out on capabilities or malfunctioning. Just consumers feel deceived by a product, they nology last less than 1,000 hours – rather as concerning is the second new form of can in theory use their rights to voice comthan the previous 1,500 to 2,000 hours – planned obsolescence: notification obsoles- plaints, make demands or even take legal could increase their profit margins. Planned cence. This occurs when consumers are told action. However, this process has a long way obsolescence has therefore been ingrained to replace a component that is in fact fully to go before it prevents companies practisin modern business strategy for longer than functional. An example is when one colour ing design obsolescence in the first place. www.insideenterprise.org | 13

Elizabeth Pritzker, a consumer who sued Apple for designing believes that planned obsolescence is unsustainable because a iPods with short battery life and then not agreeing to replace the finite planet prevents infinite growth. UNESCO estimates that battery, remains disappointed that Apple has not always lived up we would need 3.5 Earths to enable the global population to live to her impression of it as “a young, hip, forward-thinking com- the current lifestyle of the average European or North American. pany.” She believes Apple should produce longer-lasting, strong- Under today’s prevalent socio-economic paradigm, the warner products and develop a more comprehensive environmental ing of Mahatma Gandhi rings truer than ever: “The world is big policy. enough to satisfy everyone’s needs but will always be too small Similarly, JC Twining, the to satisfy individual greed.” Laowner of mobile phone repair touche therefore advocates “the company Axiom Communecessity to change our logic…

“The world is big enough to satisfy nications, told ABC News to reduce our environmental that “If they made phones everyone’s needs but will always be too footprint, waste, overproduchalf a centimetre thicker, tion and overconsumption.” small to satisfy individual greed.” we’d get three times the batBy reducing these impacts, ‘detery life. It’s ridiculous, and growthists’ encourage the harthe same applies for the glass. vest of more enduring forms of If it was just a little thicker, it would have much more impact wealth such as friendship, culture and learning. resistance.” Like many fashion phenomena, the question of Nonetheless, critics of degrowth reiterate the importance whether designers or consumers are more to blame for the pop- of a sustained level of economic growth for employment, ularity of slim mobiles seems like a chicken-and-egg debate. health, education and life expectancy. Planned obsolescence, to them, is a vital cycle that maintains the trading system. InThe problem of infinite growth on a finite planet dustrial designer Boris Knuf suggests that at any given shopAccording to renown marketing guru Philip Kotler, “Much so- ping centre, most jobs would disappear without planned obcalled planned obsolescence is the working of competitive and solescence – salespeople, designers, architects, cleaners and technological forces in a free society – forces that lead to ever- security guards alike all benefit from a system of planned improving goods and services.” But are these goods and services obsolescence. really ever-improving? Critics of planned obsolescence cite the poor quality of many of today’s mass-produced consumer goods The need to throw away a throwaway mentality when compared to the goods of earlier eras, which were made to Some experts also claim that planned obsolescence fosters techendure. Fridges and washing machines once easily lasted a quarter nological progress, which will in turn can solve the world’s enof a century. The world’s longest-lasting light bulb is at least 110 vironmental problems. In the meantime, however, technological years old and still functions admirably. In contrast, today’s tech- ‘progress’ produces an ever-increasing stream of waste. Companological innovation is synonymous with rapid product turnover. nies are violating restrictions on dumping electronic waste in “The problem is that we are all economists these days,” jokes Serge third world countries by declaring the waste as ‘second-hand Latouche, a noted critic of ‘the growth society’. goods’. In Ghana, desperate families search illegal rubbish tips Latouche, like other intellectuals of the ‘degrowth’ movement, for plastic cables to burn so that they can sell the metal inside,

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causing stunted growth and cancers in children that have products according to five categories: material health, material been linked to toxic e-waste. “There is no point in receiving reutilisation, renewable energy and carbon management, water electronic waste when you cannot deal with it, more so when stewardship, and social fairness. The Cradle to Cradle concept you did not produce it and your country is being used as the was inspired by the virtuous cycle of nature, which produces no world’s trash bin,” complains Ghanaian journalist Mike Anane. waste, only nutrients. It suggests that if production processes Anane and billions of people in the developing world have worked like nature, planned obsolescence itself could become every reason to lament the “throwaway lifestyles” of consumer- obsolete. ist societies. The UN’S Solving the Planning for posterity e-Waste Problem Initiative predicts Initiatives like Cradle to Cradle that global e-waste will weigh as are valuable because they recog“Posterity will never much as 200 Empire State Buildnise that companies have an ethiings by 2017. Meanwhile, a 2015 cal responsibility to provide better forgive us.”

Green Alliance report reveals that products. This responsibility has only 12% of the world’s smartbeen given new legal acknowledgephones are sold or traded when ment in France, where a 2015 law consumers upgrade. As collaborative economy expert Rachel mandates manufacturers to inform consumers how long their Botsman explains to The Guardian, “We’re still in an age where electronic appliances will last and how long repair parts will be we’re so enchanted by the object itself that there’s an aspiration made available. to own it and a stigma to rent it. But that’s going to change really Nevertheless, more action needs to be taken worldwide in fast as we start to give up our relationship to these physical ob- order to avoid the perils of plutocracy, where the wealthy control jects and accept they are just vessels or carrying devices to access government, and technocracy, where technical experts control sothe cloud.” Indeed, Green Alliance predicts an increase in the ciety. Fortunately, economist Jeffery Sachs believes that “in the circulation of second-hand phones that are capable of offloading new network age, commitment and truth can outpace money to the cloud. Manufacturers could refurbish phones no longer and greed.” He envisages that “consumer boycotts, shareholder wanted by consumers in advanced economies and openly resell activism and student organisers” can help mobilise the restothem in emerging markets. This business opportunity could ration of democracy away from “the hands of unaccountable help disincentivise the short product life cycles perpetuated by corporations and the wealthy.” We need to nurture a business design obsolescence. environment in which companies that plan to fail are perceived As clean-tech entrepreneur Warner Philips observes, “It’s not as unsustainable and unethical. In such an environment, only like there’s a green world and there’s a business world.” Instead, companies that favour true innovation will be profitable and business and sustainability can – and should – go hand in hand. viable. If, however, we fail to right the wrongs caused by unnecSustainability, according to Philips, is “actually the best basis to essary planned obsolescence, this failure will adversely impact build a business on.” As a founding board member of the Cradle generations to come. In the words of Mike Anane from Ghana, to Cradle Products Innovation Institute, Philips believes we need “Posterity will suddenly find out about the throwaway attitude, to rethink the engineering and production of consumer goods. the throwaway lifestyles of people in the advanced countries.”

In line with this vision, Cradle to Cradle certification grades And when this happens, “Posterity will never forgive us.” ■

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THE ROBOTIC RENAISSANCE Da Vinci and the Rise of Surgical Robots // By Lyn Chen A

s technology develops, the healthcare sector is increasingly adopting the use of robots to enhance medical treatments.

Whether it is e-pharmacy robots, biotic arms or animal therapy-robots resembling baby seals, the opportunities are limitless.

Yet what happens when robots tamper with life-death situations such as surgery?

robot, a patient-side cart and a computer console, da Vinci boasts a repertoire of surgical procedures ranging from cardiac surgery, gynaecological surgery, urologic surgery and even open heart surgery.

Much like a puppet master pulling the strings of a puppet, da Vinci and other commercial surgical robots are not truly

Weighing the benefits How effective is da Vinci? The answer is complex, as no two surgeries are the same. Intuitive Surgical claims that da Vinci reduces the amount of blood lost in surgery, which lowers the risk of infections, minimises pain and accelerates post-surgery recoveries. Da Vinci is also particularly proficient in procedures that involve the removal of cancerous tissue, including prostate cancer surgery. Due Instead of having the surgeon confined in to this effectiveness, da Vinci performed the same room as the patient, surgeons c a n r e m o t e l y o p e r a t e o n p a t i e n t s s c a t t e r e d 80% of prostatectomies in the US in 2000. Worldwide, da Vinci has treated elsewhere in the globe over 3 million patients.

However, surgeons and the health sector have mixed opinions. The absence In 1985, the PUMA 200 (Programmable autonomous. Instead, a surgeon remotely of shaky hands and reduced human Universal Machine for Assembly), devel- controls the system through computers, fatigue during long, intensive operations oped by pioneering robotics company ensuring that performance is still centred have been well received. Surgeons have Unimation, was used for a neurosurgical around a surgeon’s expertise and judgealso praised the use of 3D imaging as it biopsy. Resembling an arm, it was one ment in making precise, tiny incisions provides a sense of depth and shows an of the first robots to reach centre stage in into the body. A variant of laparoscopy, augmented reality. On the other hand, surgical robotic development, inspiring this surgical procedure involves small others prefer physically operating on innovations in the field for subsequent punctures into the body and the insertion the patient and the feeling of tangibildecades and providing the world with a of a thin camera and medical tools into ity through actual touch, rather than the glimpse of technology’s potential place in internal organs. However, unlike tradiforce feedback sensations rebounded via the future of health. tional laparoscopic surgery, da Vinci has a computer screens.

One of the more prominent success more sophisticated imaging system, using stories is the da Vinci Surgical System, a small, multi-level magnification 3D Not quite the medical masterpiece? a minimally invasive telesurgical robot camera to act as the ‘eyes’ of the robot.

Even so, there are major obstacles to released in 2000 by Intuitive Surgical, a This is an improvement to traditional implementation, such as the high costs robotics company based in Sunnyvale, laparoscopic surgery, which typically uses incurred by both manufacturers and California. Consisting of a four-armed 2D imaging for visualisation. hospitals alike. At a hefty price tag of 16 | www.insideenterprise.org

US$2 million, access to these robots is restricted only to a select number of hospitals. This price also does not account for training and additional equipment and maintenance costs, which can add up to hundreds of thousands of dollars per annum. Once obtaining the robot, hospitals have felt obliged to perform multiple da Vinci procedures to justify the purchase. Hence, an extra cost of US$3000-US$6000 is incurred from using da Vinci instead of performing a normal laparoscopic surgery.

As with all technology, risk is inevitable. Public robotic surgery is still in its

Da Vinci's performance is centred on a surgeon's expertise and judgement in remote controlling through the computer console so that there are precise, tiny incisions into the bod y.

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infancy, which means the success of medical robots is not without its complications. In 2013, there was a string of complaints from past patients of da Vinci. The 30-person lawsuit against Intuitive Surgical cited da Vinci’s malfunctions and a lack of experienced surgeons as being responsible for further internal organ damage post-surgery.

On top of this, a report from the US Food and Drug Administration revealed that between 2000 and 2013, 144 deaths were linked to the use of robotic surgery. Of this number, approximately 60% were related to technological malfunctions. It should, however, be recognised that 1.7 million robotic surgery procedures were performed over that timeframe, indicating that these results may well be marginal.

Investing into a silver future Despite these risks and surgeons’ mixed opinions, investors are highly optimistic. Increased sales have seen da Vinci flourishing financially – as at April 2016, revenue was US$595 million, a 12% increase from the last quarter. The market for surgical robots in 2015 alone was worth US$4 billion, and is expected to be worth US$20 billion by 2020 – a staggering growth rate that suggests that medical robotics is here to stay.

Indeed, the value of robotics will

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only continue to grow as demographics shift into what is known as the silver market phenomenon, a concept where an ageing population fosters greater demand for healthcare products such as robots to support the elderly. Forecasts from the United Nations suggest that by 2050, the global share of people aged above 65 will be 15.6%, a significant increase from 8.25% in 2015. Naturally, with cancer and other diseases more prevalent amongst the elderly, innovative methods of treatment will be invaluable in the future. It is these situations where the ability of surgical robots to adroitly squeeze and manoeuvre through fragile, internal spaces may prove to be beneficial.

Additionally, higher accuracy, reduced pain and faster recoveries can also be expected. If robotics companies can advance the technologies of their robots as well as establish trust with patients by highlighting their strengths, they may well set up the medical industry for long-term demographic changes.

A marketplace for surgical robots While Intuitive Surgical currently dominates the surgical robotics industry, it is anticipated that competitors will emerge in response to the positive reception of surgical robots globally. Currently, there are a small

number of successful surgical robotics providers in the market. Stryker, an American medical technologies firm, has developed Mako, a robotic arm designed for orthopaedics whereas Accuray, another American firm, has developed CyberKnife, a radiation oncology robot with the ability to track tumours.

Countering the high prices of da Vinci, new competitors are seeking to use cost-reduction as a competitive strategy to steer customers towards cheaper alternatives.

Multinational corporations are keen to place a foothold in the industry, with Samsung recently patenting a minimally invasive robot very similar to da Vinci. Moreover, Alphabet, Google’s parent company, has partnered with Johnson & Johnson to create Verb Surgical, a joint venture of Alphabet’s Verily and Johnson & Johnson’s Ethicon. An amalgamation of Google’s strength in aspects of decision-making such as machine learning, visualisation and big data and Ethicon’s prowess in sales places this venture in a good prospective position.

Nonetheless, despite the developments fuelling the robotics healthcare industry, there is still the prickly issue of patents. In 2003, Intuitive Surgical merged with Computer Motion to resolve years of intellectual property disputes regarding

da Vinci and Computer Motion’s Zeus. Clashes between medical robot companies still continue today and smaller businesses are more prone to attacks due to their lack of capital.

Operation Lindberg: Surgery across the Atlantic Despite the success of companies such as Intuitive Surgical, there will always be room for innovation. For one thing, the long-distance application of telesurgery could revolutionise the way surgery is performed.

Instead of having the surgeon confined in the same room as the patient, surgeons can remotely operate on patients scattered elsewhere in the globe – as long as the robot is on the patient’s side and the surgeon has access to the control gadgets. A pro-

The value of robotics will only continue to grow as demographics shift into the 'silver market

cedure dubbed ‘Operation Lindberg’ during the start of the millennium saw advances to this, proving that an operation with a distance spanning the Atlantic from New York to Strasbourg could be successful.

However, the vision of a publicly available telesurgical robot with the ability to transcend long distances, and even distances as far as space, is currently unfeasible, especially as research is ongoing. An aspect of weakness is the risk of the robot being hijacked. While da Vinci is secure, due to its use of proprietary software, the same cannot be said for robots operating on open source software. In Washington University, the open source telesurgery robot Raven II was unable to shield itself from cyber-attacks implemented during security tests in 2015. Since open source software is used when private networks are unavailable, the implications of hijacked surgical robots may be devastating, especially in remote locations, disaster zones and war-torn areas.

Undergoing automation?

Is there any potential for automation in an age where driverless cars are on the horizon? Currently, commercial surgical robots are wholly controlled by surgeons and, as such, there is ambiguity as to whether robots can even replace human judgement and

expertise. This is not to say that there isn’t a possibility that robots could have elements of automation in the future. On 4th May 2016 at the Children’s National Medical Center, Washington D.C., the robot STAR (Smart Tissue Autonomous Robot) almost autonomously performed a procedure in stitching parts of a pig’s intestines together.

With 60% of the operation performed unassisted, and the pig undergoing strong recovery postoperation, this suggests that surgical robots may be headed in the direction of artificial intelligence.

However, it will take many years of research and development before anything fully autonomous and safe can come into fruition – if it even does. When asked about the experience, leader of the operation Dr Peter Kim replied, “We were like parents with a young child that was about to walk.”

This sentiment of youth and potential echoes for all surgical robots.

Whether they are freshly emergent from research or have been dispatched worldwide for years, there is much to be improved and developed before medical robots can be fully fledged and functional without any risk of major complications. On what roles surgical robots will have in the future of health, only time will tell. ■

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Constructed Dimensions: Virtually a Reality?

By Sandy Chen

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he concept of creating alternate worlds to our own has been a perennial idea, stretching back 2.6 million years to the days of the Palaeolithic era. According to digital cultures critic Howard Rheingold, the virtual reality realm began as caves adorned with paintings, reserved for spiritual ceremonies where individuals learnt of their ancestry and the tricks of survival. Epic tales, books, movies and video games also demonstrate our innate desire to explore different realms.

From the 1960s escalating up to the 1990s, virtual reality became more of a concrete concept and goal, but the contemporary technology was unable to support this vision. Now the technology is at our fingertips. Is it therefore only a matter of time before virtual reality becomes more than just a rose-coloured vision, and instead becomes the new frontier in our lives? Or is the current hype still a mirage for the long road ahead? Despite the uncertainty around this question, the possibility of virtual reality infiltrating our daily lives lends hand to a new interesting suite of applications.

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What is virtual reality?

Virtual reality is a 3D computer generation of a visualised world, both spatially and temporally. Virtual reality is divided into two branches: immersive and nonimmersive. Non-immersive virtual reality is something already on our immediate peripheries – from the virtual cyberspace of the Internet, to massively multi-player online role-playing games (MMORPGs) such as World of Warcraft, which is played by 10 million users, to the candy-coloured arcade classics that line mobile screens of many commuters. Immersive virtual reality, on the other hand, is the somewhat more glamorous evolution of its former.

It involves taking these imagined environments, previously focussed primarily on visual screens, and inputting more interactive features such that the user gets the full perception of actually living in an alternate universe. Hence, an important component of immersive virtual reality is tracking and tapping into the multisensory.

Navigating Real Ecosystems Sociotechnical systems Innovation scholar Frank Geels conceived that in order for new technologies to become present and retain some sort of normalcy in our lives, they must first become a niche, then enter a stage of patchwork regimes. These patchwork regimes are a stitched-together set of actors – scientists, the government, universities, businesses, the media, society and culture – all working together in developing a multi-faceted product. As the stage of make or break, success here determines whether or not the technology graduates into more. However, whether or not this ‘technical artefact’ emerges as fully-fledged technological regimes, dramatically disruptive and ever-present in our daily lives, there must be a consideration between both available technology and that of the most important part – people. In other words, if we are to see virtual reality blossom in the near future, not only does the technology have to exist, but it must also be commercially viable with a strong pivot

towards meeting the interests of end users.

An example of a patchwork regime that did not have all the necessary components can be seen in the 1990s, before the fullyfledged rise of virtual reality. The influx of movies depicting cyberpunk themes, such as The Matrix, popularised the notion of a portal to new worlds in both the entertainment arenas and gaming spheres. One attempt to tap into this burgeoning public fascination, according to the BBC, was Nintendo’s 1994 creation Virtual Boy. The game merged images of familiar characters into 3D characters, and the device sold at a price of US$180, equivalent in 2016 prices to around US$300. While initially prospective, the product experienced poor sales figures and became a commercial flop. The issue was a question of ergoonomics rather than economics. The ideas were definitely an enormous investment by Nintendo, which was then one of the world’s leading gaming companies – but it lacked human interactivity. Poor graphics and lengthy lag times proved a major issue, especially as the heart of virtual reality is about sensing the virtual world in real-time. Nonetheless, despite the initial lack of high resolution and virtual reality capabilities, technological landscapes are constantly improving and, in accordance to Moore’s Law, could effectively be acquired and dispersed a lot more cheaply in future.

Sprouting startups and tech giants in the sky Despite proclamations that 1995 was the year of virtual reality, virtual reality reclined into the back room of research and development and did not hit centre stage until the 2010s. The current resurgence of interest towards public peripheries could be partly attributed to an acquisition of immersive virtual reality headset Oculus Rift by Facebook in 2014 for US$2 billion. Behind Oculus Rift is science fiction enthusiast Palmer Luckey, who at the age of seventeen decided to make his dream of virtual reality come true. The technology wizard set up a workshop at home and designed a prototype for a headset that would later become the enigmatically baptised Oculus Rift.

In an interview with Vanity Fair, Luckey revealed how he was quick to utilise the benefits of being a resident in virtual cyberspace, engaging in forums of like-minded people to strikingly raise funds of about US$24 million through online crowdsourcing platform Kickstarter. Word soon spread to a wider audience, then to keen investors and finally into the ears of Facebook creator Mark Zuckerberg.

In a similar fashion, other virtual reality based startups, like San Francisco-based FOVE, have also emerged from crowdsourcing platforms like Kickstarter. Acting as a starting point for startups to achieve

scale, the global reach of these platforms create low barriers of entry as long as an intersection with public needs exists. Effectively, the exploration and research into the different facets of virtual reality conducted by these startups add to the whole collage of technological knowledge, aiding in further developing and refining of the industry.

Luckey’s story and success provides insight into the greater sociocultural and economic climate, which has enabled the seeds of innovative tech companies to be planted. With the entrance of a startup scene, more individuals are taking the risk into exploring alternate employment opportunities. This trend has emerged so strongly that results from the 2011 Kaufman Index of Entrepreneurial Activity (KIEA) indicate that the number of workers flowing out of the traditional models of work to become entrepreneurs in ‘passion projects’ have surpassed even the peaks of the Dotcom Bubble in the late 1990s.

On the other side, keen venture capitalists and investors, facilitated by historically low interest rates following the Global Financial Crisis, are eager to tap into technological startups that have created products with the potential to disrupt and have reasonably long-term financing models. Among this is the growing interest towards virtual reality startups of which Alexander Taussig, a Partner in global venture capital firm Highland

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Capital, describes as phenomenal – “Never before has technology gotten so much attention before actually getting to customers.”

Applications of virtual reality – the world is your oyster Shortly after acquiring Oculus Rift, Mark Zuckerberg posted a passionate Facebook post on his vision of virtual reality in the future: “This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.”

Bringing back the dreams forged back in the 1990s, he imagines a (virtual) world of possibilities. For child and adult alike, experiences such as flying or stepping into great fantastical playgrounds would become a reality. Likewise, for more serious users, immersive virtual reality could have enormous potential training and education functions, and transform the nature of commerce and marketing.

If virtual reality did become more paramount, it could be implemented in several useful applications that would completely transform our everyday lives. #1 Reality 2.0. – Adventures and experiences in Virtual Land As recent waves of virtual reality startups have emerged with the core aim of enhancing gaming experiences, it is natural that one of the early stems of virtual reality

a survey by Time in the Game Developer’s Conference, 75% of the 2000 respondents believed that virtual reality would reach long-term sustainability, and not just become an expensive one-off gimmick.

The same can be said for other forms of entertainment. No longer just an audience member watching the screen, virtual reality allows individuals to become a part of the movie or show itself. One step towards that agenda includes an initiative by Marriott hotels. Adding Samsung virtual reality headsets in a select few New York and London rooms, the hotel chain has created ‘VR postcards’, an integrated experience where guests follow travellers over the world in popular travel destinations. In the words of vice president Matthew Carroll, this is intended to “inspire” guests and foster “imagination” in their own travelling experiences. #2 The consumer’s new looking glass Another interesting way virtual reality can play a central role in our lives is through the marketplace. In fact British supermarket chain TESCO has already developed plans to integrate a virtual reality version of their stores, allowing customers to discover available stock without having to physically visit a store. From the customer’s perspective, navigating virtual stores could provide them with the ability to map out store layouts and visualise stock before buying, saving time and unnecessary transportation or petrol costs. Virtual reality can also enhance online

Imagine sharing not just moments with your friends online, but entire experiences and adventures. would be in the gaming sphere. Making up US$25 billion of revenue in 2010, the gaming industry takes a large fraction of the entertainment industry. According to a 2014 report by The Guardian, one of the recent developments that sprung following the announcement of Oculus Rift was pioneering virtual reality game EVE: Valkyrie, created by Icelandic gaming company CCP. Taking the user to the cockpit of a galactic spaceship, the experience is immersive in the sense that wherever individuals orient their eyes, the screen follows as if they were piloting the ship themselves in real time.

For the minds pulling the strings behind the scenes, many believe that future evolutions of the likes of EVE: Valkyrie will propel the industry into the future. According to 3 | www.insideenterprise.org

shopping by overcoming the current inability for customers to see the physical products.

This could be potentially relevant for those living in incredibly densely populated cities with crowded shopping areas, consumers in remote areas far away from shops or countries with an ageing populace. Virtual reality could also benefit those wanting to purchase goods such as clothing from overseas, but who were previously reluctant because they could not see the tangible product.

Marketers are also keen to augment advertising campaigns with virtual reality.

Footwear producer Merrell’s newest advertisement takes individuals on a micro adventure across a rickety bridge, carefully placing their hiking boots in view. The same goes for eBay’s online concert, theatre and sporting

ticket seller StubHub, where individuals can view the seats they purchase beforehand.

This kind of experiential advertising, argues AdWeek writer Katie Richards, is particularly striking given the high value that the modern-day Millennial place on experiences.

Likewise, using data recorded from the buyer’s journey, marketers can track down products with higher salience to assess efficacy of advertising campaigns and observe consumer trends. These processes could be enhanced by how incredibly sophisticated virtual reality technology is becoming.

Smartphone advertising company Airpush is one such company to have realised this. It has been developing Virtual Sky, a virtual reality platform which uses ‘Hotspot’ features to track where an individual orients their eye when caught in an advertisement in virtual worlds. As affirmed by Martin Talks from Econsultancy, virtual reality has the potential to be an exciting and invaluable piece in a marketer’s tool kit. #3 Medical matters, education and seeing without being there Importantly, aside from commercial avenues, virtual reality has applications in fields of medicine, education and training and politics – the possibilities are boundless. As early as the 1990s researchers have experimented using virtual reality in medical training settings. An example of this is the use of virtual reality stimulation in laparoscopic surgery or ‘minimally invasive surgery’ education and testing. By using software such as MIST, or ‘minimally invasive surgery trainers’, medical students can test their abilities in surgical tasks that track their movements as they operate simulated geometric shapes using robotic arms. Aside from these simulations, virtual reality in medical pedagogical settings had not been widespread in the 1990s.

Now in the late 2010s, there have been movements to increase the use of virtual reality in medical training. The world’s first surgery broadcast to the public in virtual reality occurred in April 2016. British surgeon and virtual reality visionary Dr. Shafi Ahmed, who performed the surgery, is among those who seek to spread such agendas. By allowing viewers to access his experience of operating on a cancer patient through even the simple cardboard Google virtual reality cut-out, he allows them to observe the operating room in 360o view and experience the feel of its raw environment without having to be there. According to Wired, Dr. Ahmed hopes future versions of virtual reality technology could allow training to be conducted on a world-wide scale.

This is an ambitious yet important initiative, particularly given constraints on educational accessibility in developing countries that face shortages of trained medical professionals.

Outside the medical realm, other training or educational settings in which virtual spheres could be utilised include dangerous, risky or high-pressure activities such as flight training, or simply to augment classroom settings where practical experience may be costly or inaccessible. Similarly, virtual reality can be used in rehabilitation, therapy and research settings. Medical researcher Michael Andreae suggests that virtual reality could be used in the treatment of phobias such as acrophobia, where participants could partake in simulations without having to experience the real thing.

Finally, exposure to new environments could possibly allow us to become more empathic. The Guardian recently constructed a stimulated virtual reality environment of a prison cell and asked participants who entered this world whether or not they would spend 24 hours there. By presenting such confronting environments, it can ignite discussion from audiences about current situation and issues, which can help influence policies in the future. In terms of sustainability, some people have also suggested using virtual reality to showcase the effects of climate change to individuals.

Down the Yellow Brick Road: Are we there yet?

In these past few years, hype towards virtual reality has climbed to great new heights.

With projections by technology research and advisory firm Gartner that virtual reality headset sales would peak at US$20 billion by 2020, and investment pouring in by the bucket load – first to tap into the technological components of virtual reality, and later onto the software that gives it flavour and life – it is evident that at many think that virtual reality is on the horizon.

Amid the hype, some doubts have been raised about the scalability of virtual reality and whether it can survive reasonably into the future. Nintendo’s smartphone partner, DeNa Co., suggests that while virtual reality could partially transform the gaming industry, it may not be enough to topple casual smartphone gaming.The same sentiment is expressed by Chief Executive Officer of Take-Two Interactive – known for its action Grand Theft Auto video game series – Strauss Zelnick who, despite interest in virtual reality, has adopted a policy of caution as the market currently remains unclear and opaque.

Another immediate challenge is the cost of virtual reality headsets, and the consideration of those most interested in it. As Tim Culpan of The Australian Financial Review mentions, while current virtual reality

headsets cost US$600 – US$800, there are many additional costs, such as the need to purchase PCs with high enough processing capabilities to run virtual reality software.

He claims that despite the hype, 95% of consumers are unwilling to pay the extra costs incurred after attaining the virtual reality headsets. Such problems are intensified by findings from surveys made by gaming industry market researchers Superdata that a majority of those interested in virtual reality were younger consumers, who possess lower purchasing power.

While there is definitely interest, virtual reality would have to produce engaging content to convince customers to keep on buying. Further down the line, if virtual reality does scale upwards, sociocultural and legal obstacles may soon emerge, such as the health and psychological implications of long-term use, or the question of privacy or ad-blocks in relation to virtual reality advertisements.

Nevertheless, despite its long history of dreams, research and development and technological constraint, virtual reality has gone a long way since its early days. Now with further flourishing interest, developments and plans for a cornucopia of applications, perhaps this will soon create an ecosystem sufficient to push virtual reality to become a reality in itself. ■

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STRATEGIC PARTNERSHIPS ARE A NEW NORM IN INNOVATIVE MARKETING

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THE POWER OF COLLABORATION

By Lina Stein

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he new generation of collaborative marketing is showing brands how influential strategic partnerships can be. A successful partnership can lead access to new markets, increase exposure and draw larger audiences for businesses. This type of strategic and innovative marketing takes advantage of each brand’s individual strengths, resulting in a unique power-brand.

Many high-profile collaborations have been between mass retail giants and high-end design houses.

Through designer collaborations, it is possible to bring otherwise inaccessible products within reach of the masses. For example, mass retailers with strong customer bases possess a low price point and an expansive distribution channel.

After a highly anticipated wait, it is unsurprising that the Balmain x H&M collection sold out almost instantly upon its launch last November, crashing the website within minutes. Half a year after the collaboration was released, pieces are still selling on eBay for prices in the

low thousands.

When well executed, co-branded products are a formula for marketing and sales success, even more so if the products are limited edition. This approach garners profile-raising publicity via both press and social media engagement. Collaborations also create a feeling of exclusivity, which increases demand for products and allows brands to charge a premium for collaborated products.

A competitive advantage Co-branded projects are seen as novel, which sparks consumer curiosity, triggers brand recognition and means that the product will likely be highly publicised. Through the right association, it is possible for brands to alter how they are perceived in the media and by the general public.

Corporate sponsorships and partnerships are an example of the strategic moves influencing brand reputation. Citi’s partnership with Live Nation gives Citi Cardmembers access to concert tickets before they go on sale to the public, making

Citi more attractive to music fans.

This may be a deciding factor for consumers when choosing between banks.

As a payoff from the Live Nation and Citi partnership, “Citi has experienced year-on-year doubledigit growth in 2015 in customer ¬entertainment spending,” says Jennifer Breithaupt, Managing Director of Media, Advertising and Global Entertainment at Citi. Capitalising on the music industry partnership, late last year Citi and partner American Airlines teamed up to reward Citi/AAdvantage cardholders with an exclusive Imagine Dragons concert at the Hollywood Palladium. Events like this increase customer retention by rewarding existing customers, whilst also driving new followers to the brand. The benefits of this positive association and experience increases the likelihood of customers choosing Citi over a competitor.

When a product or service is offered through collaboration, this unique point of difference creates a competitive advantage. By team-

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“

PARTNER WITH BRANDS THAT ALIGN WITH YOURS IN EITHER TARGET MARKET OR AESTHETICS

”

All companies have something to offer Jessica Ruhfus, founder of Australian strategic partnerships firm Collabosaurus, believes that all companies have something to offer, regardless of their size. She says a company’s assets are useful negotiation tools, whether they are specific skills, a unique product, media contacts or even the time to devote to the partnership – all assets have the potential to be valuable.

Leveraging resources Collabosaurus steps in to help companies A partnership between Apple and IBM has leveraged the strengths of both companies find mutually beneficial matches. “Comto create the MobileFirst for iOS program. panies can find one another on the site by setting up a project and the software will Apple has said that the partnership combines “the market-leading strengths of each match them with potentially valuable strategic partners,” says Jessica. “Collabosaurus company to transform enterprise mobilwas built to make sure both brands get ity through a new class of business apps what they want out of the partnership.”

— bringing IBM’s big data and analytics With a background in small business PR, capabilities to iPhone and iPad.” Jessica found that small businesses were Less than six months after announcing the partnership, over one hundred iOS apps hesitant to approach larger companies.

While there have been large brands in suchave been released across 14 industries, cessful partnerships, small to medium busihelping to connect Apple to the global corporate enterprise market via IBM’s vast nesses are often discouraged from reaching out to large companies. Connecting with network of consultants and knowledge of bigger brands generally requires established the industry solutions market. connections, in-depth industry knowledge, and a lot of time spent cold calling, often with little return. ing up with Uber, premium Spotify users can listen to their own playlists when in an Uber vehicle. This allows Spotify to establish an advantage over companies such as Apple Music in the crowded and competitive music streaming industry. Uber also benefits as it creates another unique advantage they have over other hire car services and taxis.

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using the platform include NAB, Topshop and Uber. By strategically leveraging the resources of both brands in a partnership, the need for an expansive marketing budget for smaller businesses is bypassed. Collaboration therefore constitutes low-to-no cost marketing as brands are gaining exposure to each other’s audiences whilst simultaneously doubling their resource power.

For startups and small businesses, attracting publicity and brand awareness is a challenge. Ngoc Le, of Melbourne’s Dessert Parlour, says that being open to collaboration has led the company to work with Topshop for a VIP event. She recalls, “The Topshop event put our name out there and one Instagram post had almost 3000 likes!”

This collaboration can lead to nationwide audiences, as Ngoc explains, “From sponsoring a small workshop, the owners indirectly posted a picture of my cakes on Instagram, and a few months later my cakes were featured in one of Australia’s biggest wedding magazines.”

Future plans for Collabosaurus involve opening up the platform internationally, making it easier for Australian businesses to launch in foreign markets. Once Collabosaurus is launched overseas, Jessica says, “Location won’t be a barrier and companies will be able to get a foot in the door faster Breaking down the than more traditional routes.” She explains, barriers “An Australian brand hoping to launch in Collabosaurus breaks New York, for example could seek out a down traditional bar- partnership though Collabosaurus. With riers to collaboration, the platform, they’ll have tapped into an such as business size, overseas market and vice versa.” budget and location.

This then opens up op- Cross-Industry collaborations portunities for smaller A common audience or shared target businesses to reach out market can be useful when partnering to larger companies. To up, although it is by no means essential. illustrate, companies Ngoc says it is equally important to choose

brands both within and outside your industry, noting, “If you just stay within your industry, you are just limiting yourself to less opportunities and we all know how ‘small’ every industry can be. Reaching out to other industries can lead to new ideas, creations and a crossover of markets and consumers.” For Ngoc, the proof is in the success of her own company – Dessert Parlour has since found additional brand partners in Tiffany & Co and Oroton.

IBM moved away from the tech space to team up with fashion house Marchesa in creating a gown for this year’s Met Gala. The ‘Cognitive Dress’ combines IBM’s Watson Technology with Marchesa’s creative vision through a dress that lights up in colours reflecting the sentiment of Twitter users using the hashtag ‘#metgala’.

Marchesa says, “We were approached by IBM and we heard about Watson’s capabilities. It excited us on a creative level and we thought ‘What are the possibilities here?’” Similarly, Ann Rubin, IBM’s VP of Branded Content and Global Creative, said, “This collaboration showcased the creative potential of building with Watson, and the ability of this technology to enhance human imagination.”

The success of such creative and even counter-intuitive partnerships encourage companies to consider teaming up with what appear to be unusual or atypical collaborators. The trick is to find a shared goal – a space where brand values and purpose align.

By carefully choosing with whom to associate, brands can really set themselves apart. In order not to create disconnection, consistency is therefore key. Claire Madden, social researcher and founder of strategy and communications agency Hello Clarity, emphasises the importance of taking time to consider potential brands for partnerships. She affirms, “If there’s dissonance there, it’s ultimately not going to strengthen either brand, and it can be a risk.” Ngoc

agrees, “With any collaboration it is all about cross-promoting. However, it is also important to partner with brands that align with yours in either target market or aesthetics.” Effective collaborations should echo the fundamental philosophy of the company, strengthening brand identity in the process.

Future proofing Collaborations and partnerships also serve to keep brands relevant, and as industries and consumer preferences change, collaboration can be used as more of a survival tactic than a marketing strategy. This has certainly been the case for Mattel’s Barbie, whose sales have been in decline in recent years. As the company struggles to market a product that is declining in popularity, attempts to revive the Barbie brand include various collaborations with fashion houses.

The most recent, Moschino x Barbie, debuted late last year, with the run of about 700 dolls selling out within an hour of going on sale.

As brands are becoming more innovative in their marketing strategies, Claire says the key is that brands are paying attention to the changing external environment, since “technology is expanding the breadth of connection in an unprecedented way.” She stresses the need for brands to be agile, adaptive and responsive. “They can’t afford to do the things they’ve always done.”

Participatory marketing Innovative collaboration need not result in brands partnering with other brands.

Claire says the first opportunity a brand has for collaboration is with the public – their customers, audience and potential target market. Brand ‘Audience’ has the largest following of all, and is a strategic entity for brands to align with. For example, peer reviews are a powerful way to spread opinion and awareness, as people tend to trust what their contemporaries say.

“

Companies attempt to use audience participation to their advantage by involving the audience in content creation. As Claire elaborates, “There’s a shift in who creates the marketing content. Content co-creation is a highly engaging and personal way for brands to create meaning and connect with their audience. People have a sense of ownership over the marketing content they’ve helped create, which is great for sharing and engagement with the brand on that personal level.”

In the US, Doritos’ Superbowl competition ‘Crash the Superbowl’ invited the public to create an advertisement, with the winning entry screened at the final. With 111.9 million people watching the Superbowl final this year, the ads are as much a part of the event as the game itself. Having an ad screened at the Superbowl is perhaps the biggest marketing opportunity for a brand. According to tech company Spredfast, during the first quarter of the game alone, there were more than 150,000 tweets containing the word ‘Doritos’.

Claire says people are more responsive to content that is accessible and relatable to them. By co-creating the marketing, consumers are given the power to create their own brand meaning and associations.

Analysis by the Spiegel Research Centre at Northwestern University found that greater personal engagement affects consumers’ purchasing behaviour, such that “customers who participated in content co-creation across a brand’s digital platforms spent more.”

“The greater the personal connection we have with a brand, the more likely we are to remember it and share it,” says Claire, emphasising that “the most powerful marketing is often by word of mouth.” And there is power in popularity. Companies of all types are finding that strategic collaborations and partnerships are netting them value greater than can be achieved alone. ■

BY CAREFULLY CHOOSING WITH WHOM TO ASSOCIATE, BRANDS CAN CREATE A UNIQUE IDENTITY

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THE NEXT BOOM OR BUST AUSTRALIA'S INNOVATION AGENDA

BY MARK JEYARAJ

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China’s insatiable appetite for both mining and property, which had once sheltered us from the worst of the 2008 Global Financial Crisis, has slowed significantly, leaving a large void in the Australian economy. On one side, the weakness in commodity prices and the shift away from mining investment has signalled the end of the ‘Mining Boom’. On the other, housing prices continue to decelerate, with annual year-on-year growth falling 43% last year due to high global indebtedness and record low interest rates. In light of these facts, what does the recently announced Innovation Agenda need to target, and how can it help carry the momentum of the economy and jobs growth into the future?

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he Turnbull Government’s ‘National Innovation and Science Agenda’, brought to life by the ‘Knowledge Nation’ Summit in April 2016, underlines the importance of STEM and the services sector in propelling Australia into a new sustainable era. The $1.1 billion package, spread over the next four years, is set to “incentivise, energise, dynamise” a newer range of Australian industries, driving a new economic frontier in our relationship with Asia.

The agenda is split into four pillars – culture and capital; collaboration; talent and skills; and the government. In the first pillar, the government aims to restructure how equity is directed through tax breaks and inventive programs.

Secondly, research-focused initiatives will ensure that Australia builds a sustainable route towards an innovative future. The third pillar looks at enhancing education in digital and STEM-related fields, whilst the fourth showcases initiatives for the private sector to utilise previously untapped public resources. The agenda has set a clear goal – pivot the economy away from an insular, domestic-oriented industry centre and towards a grassroots movement led by startups, small business and greater technological and scientific research.

So why is there such a great need for innovation? The proof is in the top 10 companies that dominate Australia’s share market. Compared to companies such as Apple, Microsoft and Google that power international stock markets, Australia’s top listings are in mining, banks and telecommunications. It comes as no surprise that we lag behind internationally,

given that institutional interests too often lie in distributing dividends rather than investing into long-term research and development (R&D). Investment in nonmining industries has fallen from 14% to 10% since 2007, despite it being the core of future economic growth, whilst GDP expenditure on R&D sits 23% below the OECD average. Meanwhile dividends have risen to capture over 35% of market returns. One reason Australian companies refuse to reinvest is our imputation tax system, and our addiction to deriving tax-free income through franked dividends. Hence, the Australian economy in general shies away from investing in entrepreneurially inclined industries, leaving startups and STEM professionals looking overseas.

Ideas Brain Drain With the rise of the contemporary technology gold rush, Australia must take the necessary steps to specialise in the services sector and embrace a digitally native economy. Since 2000, the services sector has acted as the foundation of the growing Australian economy, helping create 2.9 million jobs, contributing a staggering 72.7% of GDP and employing 87% of Australia’s workforce. In other advanced economies, productivity growth has spurred the specialisation in services, but Australia lacks the modern, technology-competent workforce to do this.

Research from the CSIRO shows that six million people need to be retrained in order to avoid a severe skills shortage – a daunting prospect given our inability to train and attract the right employees.

The main challenge spurring our skills

shortage is the brain drain of researchers and entrepreneurs. Some argue that the recent ‘Review of Research Policy and Funding Arrangements’ paper’s recommendations have exasperated the brain drain by shifting the balance away from publicly funded research towards privately funded research. Policy tweaking of this nature ignores the public sector’s ability to actually deliver research, instead assuming that the innovative capacity of market forces will dramatically lift research intensity. However, this leaves actual monetary investment severely lacking. For example, Australia’s current investment into the National Health and Medical Research Council stands at 0.6% of total health expenditure, well behind the US, where 4.5% is spent on the equivalent National Institute of Health.

American investors are picking up the slack in Australia’s entrepreneurial space, with over 20,000 Australians relocating to US-based technology hubs. This is due in large part to the availability of venture capital and support networks that help innovators thrive. Adding to this situation, the government’s $36 million Global Innovation Strategy has pushed for new ‘landing pads’ in global startup capitals to help entrepreneur’s access global mentors and investors. However, these overseas hubs risk diverting even more fresh talent and ideas overseas instead of keeping them at home Back at home, the government’s coinvestment into the CSIRO Innovation Fund and the Biomedical Translation Fund ensures that Australia continues to commercialise promising ideas. However, the government’s funding cuts to the

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CSIRO sends mixed signals. In 2014, the CSIRO suffered $115 million in cuts, depleting the workforce by 20%. Another 120 job losses this year will only make matters worse. As the government continues to rely on small and medium businesses to drive innovation, the jobs prospects in the private sector for scientists leaving CSIRO are extremely slim, leaving scientists to look towards flourishing research centres in the US or Singapore.

Looking into the prospective job market, these figures are aided by the amount invested by the government into information technology in schools. The government has dedicated $12 million to ensure a focus on STEM-related subjects across the curriculum, with $3.5 million dedicated to coding and $7 million dedicated towards greater mathematics teaching. The introduction of such initiatives by the former Minister for Education, Christopher Pyne, has certainly begun the path required for future generations of Australians to compete on the world stage. However, Australia has much ground to catch up compared to exemplar countries, like Estonia, which have invested significant funding into training every publically educated student in coding by the age of eight.

Embracing Asia Asia continues to be a source of growth for the global economy, especially as the region’s middle class is expected to grow from 500 million to 3.2 billion by 2030. Despite the anticipation that Asia will produce half the world’s output by 2025, only 9% of Australian businesses currently operate in the region. As such, 11 | www.insideenterprise.org

more exploitative Asian competitors have overshadowed Australia’s limited offshore presence, particularly in small business. Cities like Shenzhen in China’s south are looking for ideas and innovators of their own, with the ‘Innovation Competition of International Talents’ hoping to attract entrepreneurs from around the world, including Australia. Despite Sydney also being recognised as an esteemed innovation centre, the potential of attaining up to US$100 million in government funding to establish a foothold in the booming Chinese market often proves too great an attraction for technology startups. The question is how the Australian government can sustainably shape the building blocks of our economy to make Australia more attractive to innovators.

Infrastructure then innovation Unless the government can assemble the right infrastructure to underpin innovation, the much-heralded ‘Idea’s Boom’ may quickly fall flat. Last year, only $19 million of early stage seed investment was funnelled into Australian tech startup ventures. With the market of venture capitalists currently being saturated by big players looking for assured deals, usually above $1.5 million, the government’s new stimulus lacks focus on smaller projects. Furthermore, studies from Deloitte show that the success rate of Australian startups is only 4.8%, compared to 8% in Silicon Valley, exposing our inferior ability to scale-up startups into sustainable, global businesses. Comparable companies in the US receive 4.8 times more early-stage capital than those in Australia, and 100 times more capital once they

are ready to scale. Whilst we may not expect to replicate the success found in the US, part of Australia’s challenge lies in the underutilisation of current opportunities. For example, only 39% of Australian startups submit applications for grant funding. This creates a major obstacle for Australian innovators and startups competing globally against highly funded, well-backed international entrepreneurs.

With the aim of turning such figures around, the government intends to invest $459 million into scientific research over the next four years, with funds directed towards collaborative research infrastructure facilities, the Australian Synchrotron and the Square Kilometre Array.

These initiatives will ensure that Australia's collaboration between research and industry on innovation is no longer the second lowest in the OECD. However, levering universities to undertake more applied and commercial research as opposed to basic research may actually penalise innovation, as basic research has historically proven to be the instrument of globally benchmarked innovation.

Investing in good public policy The government has proposed investing in stronger public policy to ensure that the nation can take full advantage of the digital age. This includes $106 million spent on various tax breaks, insolvency laws and new visa processes. Proposed tax breaks include a 20% tax offset on newly issued shares in startup investments, and a capital gains exemption on startup equity. These favourable concessions should increase the number of seed stage startups, although evidence from California, where capital gains tax is at a staggering 33%, suggests that tax rates themselves do not encourage or inhibit startups growth.

Instead, supportive infrastructure and the commercialisation of innovation spurred by various government agencies like Defense Advanced Research Projects Agency are more important in providing a supportive pipeline to startups. In comparison, Australia’s tax incentive schemes, targeted at large corporations, tend to encourage projects that would have happened regardless, rather than incentivise more innovative investors. The Australian Government may alternatively look towards the UK, where small businesses can access government-backed unsecured fiveyear loans of £25,000, which reduces the entrepreneur’s burden if their business fails.

Meanwhile, insolvency law reforms mean that bankruptcy periods will be reduced from three years to one, which encourages more risk and experimentation and reduces the personal liability for entrepreneurs. Finally, an ‘Entrepreneur Visa’ will make it easier for overseas STEM researchers to move to Australia, enhancing the innovative capacity of our economy. Whilst some entrepreneurs are puzzled as to why funding is being directed towards research rather than at startups directly, Assistant Minister for Innovation Wyatt Roy claims that creating a flourishing startup ecosystem comes first. Government

investment may successfully bolster a sustainable growth model, as seen in Israel where strong government support has built a tremendous startup ecosystem possessing the highest number of startups per capita in the world.

Establishing our start-up nation The Australian Government is ensuring that its current capabilities benefit SMEs in order to drive innovation and research development in the startup industry. The launch of an online marketplace will see tech startups compete for $5 billion of new government ICT procurement contracts. In essence, this reduces the burden on SMEs to prove their worthiness when bidding against larger firms for government tenders. This federal procurement strategy also provides the government with more innovative solutions at a lower cost. Whilst grabbing headlines, this substantial initiative risks failure if there are insufficient resources allocated to uptake and training in comparison to the large amount invested in development.

To further benefit startups and Small and Mediumsized Enterprises (SMEs), the Federal Government in partnership with Microsoft Australia has spent $280,000 to bring one of the world’s top accelerators, MassChallenge, to Australia in 2017. A not-for-profit organisation that started in Boston in 2009, this initiative will help drive a startup ecosystem through idea-pitching competitions, startup ‘boot camps’ and a global network of mentors. According to Christopher Pyne, the organisation has helped raise over “$1.1 billion in funding, generating over $520 million in revenue and creating 6,500 jobs” thus far. What makes MassChallenge different is that it does not take equity from its resident startups. This approach scales skills across global ecosystems while encouraging entrepreneurs to innovate with the security of knowing that they retain their entire earnings. Nonetheless, it is yet to be seen how successful MassChallenge is in supporting high-impact early-stage entrepreneurs, given that there is great potential in the industry but even greater risk.

If Australia wants to genuinely prepare for a new golden age of technology-based prosperity, investment into innovation alone is not enough. The National Innovation and Science Agenda needs to be led by strong policy in sustainable research opportunities that keeps knowledge generation inside Australia and includes scalable programs that provide innovation industries with tangible benefits. Nonetheless, the new agenda signals the start of a shift in the national mindset towards more risk-taking and looking at measures that last beyond the mining boom. Indeed, Australia’s ‘Idea’s Boom’ acts as just one part of the government’s multifaceted strategy for sustainable economic growth. However, with several other governments enacting the same approach globally, the question remains as to whether the Australian government has done enough to protect Australia’s economic momentum for the decades to come. ■

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Getting Off the Ground A recent history Costly, unregulated and For many years, space was the arena potentially deadly, space of the great Cold War superpowtravel and exploration was traditionally viewed as being ers: the United States and the Soviet Union. Even though the US governfar beyond the reach of the average space-nerd or wealthy ment and military still constitute investor. But with the increasing 54% of global space expenditure, commercialisation of the space the global composition of the space industry, and with the global industry has shifted, with China space economy reaching $330 launching more rockets than the billion in 2014, the question has US in 2011 for the first time ever.

The industry is at a crossroads, with now become: can Australian fundamental changes in the areas of companies capitalise on this ownership legislation, launch costs propulsion?

BY Rebecca Johnston

ingly global space capabilities looming on the horizon.

To improve its ability to participate in multi-billion dollar launches, NASA has entered into public-private partnerships to great success. Private companies are pushing to extend beyond the traditional areas of satellite communication, positioning and imaging to invest in and explore potential opportunities for citizen space travel, lunar and asteroid mining as well as the dual research and educational use of miniature satellites called through reusable rockets and increas- CubeSats.

This collaboration has had clear fiscal benefits for NASA, which are

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welcome in light of past budget cuts as well as a proposed US$300 million budget cut for 2016-17. As reported by the Space Foundation, commercial space activities made up 76% of the global space economy in 2014, growing at an annual rate of 9.7%. To put this into perspective, this growth rate was higher than China’s economic growth rate over the same period.

Public-private partnerships Currently, the main purpose of public-private partnerships is for commercial space companies such as SpaceX and Boeing to traffic resources to the International Space Station.

The appeal of these partnerships for both parties lies in the Commercial Leverage Model employed.

This crux and crutch of this model

is that because these contracts only pay upon successful completion of milestones – which are set by the proposing company - government oversight can be reduced, decreasing technical risk and cost. This is because foreseeable performance shortfalls or schedule changes can be built into the contract terms, rather than by moulding projects to unrealistic NASA specifications. The impact of this model can be seen through the freedom it provides commercial space firms, increasing the ability for new innovations to filter into the industry.

With the archetype of power changing, both individual and institutional investors are recognising the promise of this business model. Fortune Magazine stated that “Venture capital firms invested $1.8 billion in commercial space start-ups in 2015, nearly doubling the amount of venture capital invested in the industry in all of the previous 15 years combined.” This boost in cash flow will be instrumental in incentivising more individuals

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to start and expand space ventures. Furthermore, this financial interest has sparked greater scrutiny, culminating in the most significant reform to occur in the industry’s history – legislating ownership rights.

Legislative arrangements Until recently, the commercial space industry had been largely unregulated. However, in 2015 US Congress passed the Commercial Space Launch Competitiveness Act, ruling that private US companies now have ownership to any material that they collect in space. Space is now open for business. But what exactly is out there to sell?

This legislation will clearly benefit companies such as asteroid mining company Planetary Resources Inc., which can now claim ownership over any minerals mined in space. It has been forecasted that this will lead to interplanetary gold mining and water retrieval for rocket fuel, but some are more sceptical. A recent feasibility study by the Keck Institute for Space Studies reports that the retrieval of a single 500 tonne asteroid to the moon would cost US$2.6 billion, which may make space mining unfeasible for the foreseeable future while minerals remain relatively abundant and accessible on Earth.

Domestically, policy reform is also underway.

The Space Activities Act 1998 is being reviewed to align Australia’s transition from an industrial and agricultural economy to an advanced, technology-based economy. This may appear to be somewhat of a symbolic gesture given the $115 million budget cut to the CSIRO in 2014 in addition to a further proposed 275 job cuts later this year. Nonetheless, this reform presents an ideal opportunity to pave the way for future growth of a sustainable and diverse space industry in Australia.

Consequently, with property rights now mandated in law, some investors are exclaiming that space material is an emerging asset class.

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However, returns are as uncertain as ever and so caution is still warranted.

Space is now open for business.

But what exactly is out there to sell?

Gambling on rewards There are two components to the value proposition of space activities: what is taken up and what is brought back down. In terms of materials being transported up into space, value lies in investigative research. Research equipment taken up into space may drive potential discoveries that could transform our understanding of physical and life sciences, clean energy, materials manufacturing and our changing planet. As for the value of materials brought back down to Earth, space minerals and the vast data collected from satellites may in the future potentially provide substitutes to resources that are depleted on Earth.

The core issue that prevents space exploration and mining becoming profitable is launch costs, which even today is eye-wateringly expensive.

Much of this difficulty stems from the cost of non-reusable rockets, which is a central concern of emerging space companies. SpaceX’s Chief Executive Officer Elon Musk argues that rocket reusability will cause "a hundred-fold reduction in marginal costs." Such estimates yield a predicted operational return of 40% if reusability can be perfected, according to launch cost figures

by Chief Operating Officer of SpaceX Gwynne Shotwell.

Seeing the opportunity that these theoretical returns present, companies are extending their reach, and risk, into space. But there have been some notable failures – both economic and physical. In early 2015, the Australian Stock Exchange listed company NewSat failed to launch its AU$600 million satellite due to cost overruns, loan defaults and management issues. In August 2015, NewSat was placed into administration, showing the many pitfalls and downsides that new players face in the industry. Thus, investment returns are demonstrably uncertain and

even in the case of successful launches, yields can be slow and highly variable given the untested outputs and returns of some of these new technologies.

Can space be the new business frontier?

The short answer: it depends. In its broad outlines, the industry is heavily reliant on high valuations and is being propped up by the investments of high net worth individuals. Furthermore, some propositions, such as Jeff Bezos’ lofty plan to colonise Mars, currently fall short of being viable and actionable business plans, and hence are unsustainable in the long-run. But there is still enormous value to be captured.

Proponents of space commercialisation have cited that new technology developed by the space industry will seep into other areas of the economy, broadening the scope and potential of the industry.

When looking into the near future, a main source of cash flow could be found in data collection. Carissa Christensen, Managing Partner at The Tauri Group and adviser to several commercial space start-ups, says “SpaceX opened the door, but what really brought on the investment is data. Satellite systems are going to create large data sets, and those data sets yield insight into corporate policy and industrial activity around the globe - things like corporate supply chains, oil production, or shipping and maritime activity.” This suggests that the real value of commercial space travel is not in space mining or tourism, but in space data analytics, and in using that data to gain greater insights into our impact on the globe.

Terra Bella, a Google subsidiary specialising in high resolution Earth observation satellite imagery, high definition videos and analytics services is currently exploring this

frontier in data politics. In terms of momentum, this is not a dramatically new approach, but is rather a refined use of existing satellite capabilities. This analytics-driven approach may be deemed as the short-term frontier, whilst substantial material collection from space and the establishment of permanent, habitable bases on the Moon are much more long-term endeavours.

To infinity and beyond or left behind: the Australian core In an ideal world commercial intent should override corporate history. However, with Australia being the only OECD country not to have a space administration authority, it is inevitable that Australia’s historically nascent space industry poses significant challenges in any movement towards a robust space industry.

At the economy-wide level, Australia’s lack of space travel investment and infrastructure, such as viable launch pads, makes Australia poorly positioned to start launching rockets. Nevertheless, capabilities should be developed in providing support activities. A notable recent success is the startup Quberider, which provides satellite hardware kits to students to design experiments that, if successful, may be launched and tested at the International Space Station.

Furthermore, existing Australian companies could diversify their activities and investments in the space industry, capitalising on the 10.75% 10-year annual return of the Standard and Poor’s Aerospace and Defense Industry Index.

More

specifically, mining companies such as BHP Billiton Ltd. could buy a stake in Planetary Resources in order to broaden into space mining, while insurance companies may follow Lloyd’s of London’s lead through covering the innumerable risks associated with new space projects.

The need for change While there are significant potentials in the space industry, especially in the areas of data collection and communications, Australia simply is not in a feasible position to send our own rockets into space in the short-medium term. The enormous risks involved, even with improvements in technology and legislative changes enforcing private ownership of space materials, mean that any full-fledged commercial mining or habitation in space is still many years away.

Instead, Australia should seek to establish itself as a leader in communication, radar and scientific support services.

A final point to make is that whilst the strained balance sheets of large Australian companies such as Qantas and Rio Tinto may make space investment foolishly risky, such financial difficulties also act as a timely reminder that the Australian economy is calling for change. It is true that losses incurred can and will be substantial, but in spite of this, investment and participation should be incentivised. If Australia can provide the needed impetus for a space industry through financial and legislative reform, it will be one step closer to positioning itself over the coming decades as a modern, technology-oriented economy. ■

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Cameron Bestwick

Australia cannot thrive without clusters It’s official: innovation is a buzzword.

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y far the greatest abuser of the word 'innovation' recently has been the Australian Federal Government. The ‘Ideas Boom’, as it has become known, is a wellintentioned policy but carries a fatal flaw: it is simply a wish list, mistaking its goals for a strategy.

Had this occurred in any other policy domain it would be a forgivable flub. But nearly every other OECD country has been experimenting with their own versions of this type of policy since the 1980s.

Australia has effectively rejoined the race with the newly announced ‘National Innovation and Science Agenda’, but remains conspicuously behind the pack. But playing catch-up will require not so much an ideas boom as an explosion. It requires a match in our proverbial gas tank – in other words, a miracle.

There may indeed be nothing wrong with pinning Australia’s hopes on a miracle, besides Donald Horne turning in his grave once again. We could simply bet the farm on Australia remaining the “lucky country” and move on, but in doing so, our policymakers must be willing to travel to the place where miracles can actually happen: sub-national economies, or ‘industry clusters’.

Industry clusters have been some of

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the biggest economic miracles of the last century, and possibly even all post-agrarian society. The power of an industry becoming headquartered in a city or region is too great to be ignored. Most of the ideas booms throughout history have in fact been industry clusters by a different name.

These include Las Vegas gaming, Hollywood filmmaking, Swiss banking, Silicon Valley hi-ttechnology, and of course, champagne in Champagne.

Australia is noticeably absent from this list. It is home to no such clusters. Even if the policy ambition existed to grow clusters, the full weight of government support may not even be enough. The origins of clusters are marvellously unpredictable, as AUSTRALIA HAS EFFECTIVELY REJOINED THE RACE BUT REMAINS CONSPICUOUSLY BEHIND THE PACK demonstrated in the following histories of the more notable clusters.

The construction of the Hoover Dam brought an extraordinary mass of young, income-earning men into the Las Vegas area during the 1930s. This triggered the

development of an overlarge entertainment industry, and the region has exported global tourism for decades.

Free financing advice was given to the 1970s startups of Trinity College’s modestly successful Cambridge Science Park in the UK. The ensuing commercialisation boom completely outgrew the park and the Cambridge Technopole is now home to over one thousand technology companies.

Ethno-linguistic diversity, limited agricultural land and poor access to the sea caused Switzerland to specialise in sophisticated services much earlier than its European neighbours. Stable currency, recognised permanent neutrality and 20th century fears of war-fuelled expropriation propelled Swiss banking to mountainous heights.

Silicon Valley, despite popular belief, emerged from early 20th century radio contractors to the US Navy. They were forced to collaborate with each other to compete against powerful state-backed rivals, and shared a desire for strong indigenous industries in the nation’s disadvantaged West. This culture collided with Stanford University’s spinoffs and startups of the 1940s and 1950s, which sealed the region’s phenomenal trajectory.

THE POWER OF AN INDUSTRY BECOMING HEADQUARTERED IN A CITY OR REGION IS TOO GREAT TO BE IGNOREDT

In all these cases, and indeed for most others, the role of government is unclear.

The best clusters were evolved rather than legislated. Government was usually secondary to these other forces, behaving more like an underwriter. What is obvious about government’s role however, was that in every case, it was a beneficiary.

TO HOST SUCH SELFREINFORCING GROWTH WOULD BE A GREAT BOON FOR GOVERNMENT – BUT IT IS ONE THAT HAS SO FAR ELUDED ALL AUSTRALIAN GOVERNMENTS Clusters are characterised by positive spirals. They attract and grow the best talent because they are at the cutting edge of their industries. Access to this talent pool, as well as knowledge spillovers and supply-chain benefits, becomes a magnet for the other inventive firms to join the action. This in turn attracts even better talent, and the cycle repeats.

To host such self-reinforcing growth would be a great boon for government – it is one that has so far eluded all Australian governments. Only two explicit attempts to bring about clustering in Australia have ever occurred: the Hawke government’s Multifunction Polis (MFP) and the Innovation Precincts floated by the Gillard Government. The MFP failed to gain traction with its space-age name and the Innovation Precincts were never able to compete for oxygen amidst the RuddGillard leadership skirmishes.

Spectacular naming and leadership showdowns aside, there are still several almost insurmountable challenges to a successful government-backed ideas boom, including the need to be selective and patient.

Coming to globally dominate only a few industries would mean concentrating government support in the strongest, densest industries rather than the weakest.

Any such advocacy in public discourse is political suicide. ‘Puppet governments’, ‘regulatory capture’, ‘mollycoddling’, ‘command economics’, ‘corruption’ and ‘crony capitalism’ are just some of the most likely

accusations to take flight. About the gentlest label an Australian government could hope for is ‘technocrats’.

Even if government could be selective, it certainly couldn’t be patient. The gestation period for a dominant industry cluster is longer than any knife-wielding political apparatchiks are prepared to wait. This is a perennial problem with the Australian system and has thwarted many other longterm policy ideas.

The cornerstone is in place. Australia has emergent strength in a number of industries not yet headquartered anywhere else on the globe. The logical starting point would be food technology and packaging around Melbourne, or mineral and energy extraction in Perth. Future opportunities may range as far as digital media, tropical medicine, marine services, environmental engineering, medical instruments and aged care.

Where the capstone goes remains to be seen, but it will be a function of the public appetite for industry clusters and a subtle mastery of hands-off government support.

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Romilla Mohan

Telematics Driving Down Risk Is it only a matter of time before telematics overtakes the insurance industry, revolutionising our behaviour and the way we pay for insurance?

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n an attempt to provide competitive pricing and minimise their risk exposure, insurers around the world have turned to telematics as the next wave of innovation.

Although momentum in Australia has only picked up recently, the incorporation of telematics in insurance pricing is widespread, especially throughout Europe.

What is Telematics?

A combination of wireless and sensor technology fixed within vehicles, telematics allows a third party to monitor a vehicle’s location and movements remotely in real time. The technology is capable of accurately measuring the vehicle’s speed, location coordinates, on-board mass and straight line and angular acceleration. This data is then sent wirelessly to an external receiver that analyses the vehicle’s usage.

By merging telecommunications and informatics, telematics allows insurers to monitor vehicle activity and offer personalised premiums to motor insurance policyholders based on the vehicle’s individual usage and risk.

Young drivers are often stereotyped as being reckless on the road, such that they face collectively higher insurance premiums. This raises the divisive question – is it fair to make all young drivers pay a higher premium when only a minority are 19 | www.insideenterprise.org

at fault? Through monitoring the driving behaviour of each individual policyholder, instead of making assumptions about the collective demographic, collected data is sent to insurers in real-time, meaning responsible and low-risk policyholders can be identified and offered a fairer premium.

Additionally, embedded GPS and sensor technology enables drivers to be updated with real-time traffic updates. Insurers are incentivised to provide additional services such as real-time traffic alerts to minimise the accident risk of their policyholders.

Using acceleration data and sensor technology, telematics devices can automatically detect collisions and inform emergency services and accident assistance to attend to the scene. With boundless opportunities opening up for both drivers and insurers, especially in the private-use sector, the momentum behind the implementation of telematics is stronger than ever.

The take-up of telematics overseas & its benefits Internationally, the take-up of telematics has been extremely successful. The opportunity for flexible motor insurance pricing and the technology’s real-time monitoring capacity has encouraged insurers to add breakdown and emergency assistance, as well as stolen vehicle tracking to their

product offerings.

Europe leads the way globally in the implementation of telematics, as major insurance companies already offer usagebased pricing. Since the European Commission’s eCall initiative in October 2015, all new cars sold in the EU must have a built-in accelerometer that automatically detects any strong impacts and directly alerts emergency assistance. In less than a year, this mandatory listing has proven to be very successful, reducing emergency response times by 40% in urban areas and 50% in rural areas. Incredibly, it has been estimated that telematics technology saves around 2,500 lives every year. Beyond emergency assistance, surveys reveal that approximately 70% of drivers in Italy and Spain are interested in telematics, due to its potential to offer fairer and lower insurance premiums for safe drivers. These value-adding services also made telematics attractive to insurers, as it creates product differentiation and encourages safer driving habits amongst policyholders.

Challenges preventing implementation in Australia Although telematics is considered at the forefront of cutting-edge technology globally, it has only recently emerged in Australia. Here, privacy is the main hurdle

that insurance companies face, as vehicle owners are concerned about the ability of third parties to misuse data that precisely monitors their location in real-time.

With extensive amounts of personal data being collected, police may also seek to gain access to this data to help criminal investigations. Insurance companies face the unenviable task of having to enforce expensive security measures to prevent disclosure, modification or misuse of the personal information of its policyholders.

Despite such potential safeguards, many consumers question whether insurance companies should even own and store such personal data.

Also preventing the implementation of telematics is the insufficient in-house skillset of Australia’s insurance firms in both managing the product and offering sufficient incentives to policyholders. A 2014 survey of all major insurers by Finity Consulting found that more than a third of insurance firms believed that they did not have the appropriate in-house skillsets to implement telematics systems. Since only a handful of large global companies possess the capacity to implement and efficiently manage telematics technology, many Australian insurers will need to partner or form alliances with technology firms to efficiently manage process implementation and benefit to its policyholders.

Telematics is inherently attractive to safe

drivers because of its ability to provide them with lower insurance premiums.

However, the high initial costs of installing the technology is another deterrent to its implementation in Australia. Insurers will attempt to shift the very high initial costs associated with the manufacturing and installation of the device onto the vehicle owners. Yet more than 50% of Australians do not want to contribute at all to these technology costs, and only 3% would consider a significant contribution of more than $50.

Widely supported by Australian insurers, one recent practical solution is to install the telematics device as a standard feature on all newly manufactured cars. However, this then pushes installation costs onto car manufacturers, which again creates resistance to a fully-fledged implementation of telematics in Australia.

Today’s increased momentum in the take-up of telematics Telematics is considered part of the latest wave of the technological revolution, bringing increased efficiency and valueadding services to modern transportation and insurance systems. The momentum towards implementation is gradually building in Australia, with corporate fleet maintenance leading the way by using telematics to monitor company vehicles and alert company drivers of dangerous or

congested roads. As privacy concerns are less prevalent in corporations compared to private individuals, insurers are using the corporate industry as a platform to pilot test and improve their telematics services before opening up to the private vehicle sector in the future.

The driverless car, another cutting-edge innovation, is predicted to be in use worldwide by 2025. As the likelihood of driverless cars causing an accident is minimal and often independent of the car owner’s risk profile, insurers may face new challenges in the future when pricing insurance premiums for these safer driverless cars.

Telematics addresses this issue by offering customised pricing that is dependent on car usage, not driver profile.

The telematics transformation The emergence of cutting-edge technological innovations such as driverless cars is further pushing the drive behind bringing telematics into mainstream insurance.

Telematics has seen tremendous success in major European countries in reducing road deaths and promoting safer driver behaviour. With the inevitable introduction of services including breakdown notification, fuel saving tips and real-time driver feedback through telematics, it is only a matter of time before telematics transforms the insurance industry. ■ www.insideenterprise.org | 20

Eleanor Harrison-Dengate

The Harper Review Worth the Hype?

T

he Harper Review was sparked by recent public debate about large companies’ misuse of market power, and whether the current legislation, encapsulated in section 46 of the Competition and Consumer Act 2010 (CCA), provides adequate recourse and protection. In response, the Coalition Government will adopt the recommended reforms, including the introduction of an effects test, to make it easier for the Australian Competition and Consumer Commission (ACCC) to sue big business for anti-competive behaviour.

Current legislation In terms of the actual law, the new legislation essentially replaces a scalpel with a hatchet. Under the current three-step process, section 46 must be contravened by showing that (1) the firm had substantial market power, which it (2) took advantage of, for (3) an anti-competitive process.

Highly specific, this sets a high bar that is extremely difficult to prove in court.

In the 2003 case of Rural Press Ltd v ACCC, Rural Press threatened to distribute a free newspaper in a rival newspaper’s distribution area. The High Court found that, while Rural Press’ conduct substantially lessened competition, it didn’t breach the ‘take advantage’ provision and so was not anti-competitive behaviour.

IN TERMS OF THE ACTUAL LAW, THE NEW LEGISLATION WILL ESSENTIALLY REPLACE A SCALPEL WITH A HATCHET The Harper Review and Justice Kirby in his dissenting judgement both found that the three-step test is too narrow, since it contradicts the original purpose and is “not reliably enforceable and permits anti-competitive conduct.” ACCC Chairman Rod 21 | www.insideenterprise.org

Sims deemed the legislation “unworkable” since big business could successfully argue that they did not have “substantial market power,” or that the market was different to what the ACCC believed.

tion Tribunal ruling that Virgin provided sufficient industry competition such that Qantas was not acting anti-competitively.

However, New Zealand courts objected to the merger, highlighting the conflicting approaches to competition laws and the inherent uncertainty in using the effects test.

Peter Strong of the Small Business Council of Australia believes that the effects test will be a triumph for small business litigants. However, a typical court case, even if the plantiff wins and the defendant does not appeal, will still cost at least $2-$4 million, making it unlikely that small businesses will pursue actions in court. It is therefore arguable that the reforms will

The effects test Under the Harper Review recommendations, the new section 46 involves a two-step effects test to distinguish between anti-competitive behaviour and actions that are harmful to individual competitors but nevertheless preserve market competition. The new law states that “a corporation that has a substantial degree of power in a market shall not engage in conduct if the conduct has the purpose, or would have or be likely to have the effect, of substantially THE CURRENT LAW IS ARGUABLY lessening competition in that or any other EVEN MORE PRONE TO market.” Worryingly, this may potential broaden the net to incorporate unilateral EXPENSIVE AND UNNECESSARY conduct that nevertheless substantially LITIGATION reduce competition.

However, courts may be reluctant to set a precedent of protecting competitors against only slightly increase the number of small competition. Historically, legislation has business wins. usually been broadly defined, since competition is unpredictable and varies greatly Reactions to the Harper Review between industries, and since a definitive The Harper Review was commissioned by list of competitive or anti-competitive former Prime Minister Tony Abbott in Deactions is useless and counter-productive. cember 2013 to establish “a genuine root Judges therefore possess discretion to rule and branch review of competition laws, based on the facts what is best for competi- to ensure that small business can compete tion and for consumers. equally with big business.” Barnaby Joyce, The effects test, when used in other Deputy Prime Minister and Minister for legislative provisions, is used no more Agriculture and Water Resources, said that frequently than the current section 46. The the reform will “ensure we have a more historical experience of the effects test in transparent and competitive marketplace” the previous section 50 suggests that courts and that “the ACCC will have meaningwill be hesitant to use the effects test to ful provisions to protect businesses that rule in favour of protecting competitors have been subject to the misuse of market over competition. For example, the ACCC power.” The Coalition Government thereunsuccessfully pursued Qantas in 2004 fore is supporting the ACCC to improve over its proposed merger with Air New communication with small businesses, conZealand, with the Australian Competinect small business to alternative dispute

resolution schemes, and appeal to a large base of its constituents.

However, Shadow Treasurer Chris Bowen has said the reforms would result in a “lawyer's picnic,” and a “chilling effect” on innovation. Labor believes that the THERE IS CONJECTURE THAT IF THE GOVERNMENT WAS SERIOUS ABOUT REFORM AND PROTECTING SMALL BUSINESS, IT WOULD RAMP UP FINES AND POUR GREATER RESOURCES INTO THE ACCC reforms do not go far enough, but this assertion fails to acknowledge that the current law is arguably even more prone to expensive and unnecessary litigation. Instead, Labor has promised further consultation on how on reduce litigation cost for small businesses when claiming for anti-competitive behaviour against larger firms.

The Business Council of Australia stands against any review at all. It fears that currently legitimate unilateral behaviour, such as heavy discounting, refusing to supply other businesses, or exercising legal rights against other businesses, could be restricted under the new law. According to Shadow Treasurer Chris Bowen, this could have a “chilling effect” on innovation.

John Durkan, the Managing Director of Coles stated that “the ability of successful businesses to compete will be constrained by the need to continually seek legal advice.” Durkan stated that these new laws may result in higher retail prices in regional centres, although this enormously oversimplifies pricing mechanisms.

In response, ACCC Chairman Rod Sims noted that “If you out-compete your competition and put them out of business, that cannot possibly trigger section 46.”

However, this oversimplifies the significant difficulty of distinguishing between competitive and anti-competitive conduct, and the difference between protecting competition and protecting competitors.

Comparisons with the international experience Internationally, the US uses an effects test in the Sherman Act, the landmark statute for US competition law, which is somewhat like Australia’s proposed reforms.

Proponents believe that this will bring Australia in line with international standards, but even after 120 cases it remains a very grey area of the law.

In 2009, the European Commission successfully fined Intel over €1 billion for anti-competitive behaviour over its decision from 2000 to 2006 to incentivise major retailers and manufacturers with rebates in the hopes of monopolising the

PC market.

Australian fines, with a maximum penalty of $10 million, are paltry in comparison and greatly diminishes the ACCC’s power.

There is conjecture that if the government was serious about reform and protecting small business, it would ramp up fines and pour greater resources into the ACCC. Where to now?

If the Harper Review recommendations are successful, they will have a preventative effect, keeping small businesses out of court. Competition law is a notoriously difficult area to legislate, and only time will tell whether the recommendations will effectively boost the ACCC’s effectiveness.

However, if the government is serious about championing small business and encouraging the ACCC to pursue cases against big business, the government must look beyond just tinkering with the law. Alongside these reforms, maximum penalties should be increased, and funding to the ACCC drastically reformed. The Harper Review’s proposed changes may be for the better, but there is still a long way to go in protecting competition and consumer rights. ■

www.insideenterprise.org | 22

David Hogan

Gearing Towards The Future N

egative gearing is a complex area of property and taxation that has divided Australia. In the 2016 Federal Election, the Labor Party under Opposition Leader Bill Shorten proposed to address concerns over skyrocketing property prices by limiting negative gearing to only newly built properties, whilst the Liberal Party under Prime Minister Malcolm Turnbull vowed to leave the policy unchanged. This has left many people wondering how negative gearing impacts house prices, and whether it’s the best way to tackle housing affordability. The answers to their questions hold the key to the future of the Australian property market.

What is negative gearing?

Gearing, or leverage, occurs when an individual borrows funds to purchase an asset such as a house or an apartment.

Following the purchase, the owner may receive income by renting the property, and receiving capital gains upon sale.

While holding the property, the owner must pay interest on the loan, and other expenses including council fees. A standard investor should want weekly rent payments to exceed interest repayments, creating net weekly inflows.

However, in the case of negative gearing, weekly interest repayments exceed rent received, such that the owner makes a weekly loss on the property. This is because the net loss may be claimed as a tax deduction against taxable income, which includes rent income. As taxable income falls, total income tax paid also decreases.

23 | www.insideenterprise.org

Essentially, gearing property aims to either have rental income exceed interest repayments, creating net weekly income, or else oversee capital growth such that large capital gains can be realised when the asset is sold. Such investment is done with the assurance of negative gearing, where any losses incurred while the property is rented are offset by tax deductions.

Recent growth in Australian property prices, especially in Sydney and Melbourne, has convinced many investors that negative gearing is a relatively safe and profitable bet. Indeed, some investors hold a view akin to the famed Japanese ‘land myth’, where property prices can RECENT GROWTH IN AUSTRALIAN PROPERTY PRICES HAS CONVINCED MANY INVESTORS THAT NEGATIVE GEARING IS A RELATIVELY SAFE AND PROFITABLE BET never truly fall because long-term price crescendos always override temporary price fluctuations. This encourages investors to negatively gear properties since they benefit from long-term capital gains and can offset weekly cash outflows by reducing income tax payable.

A recent history of negative gearing in Australia Negative gearing was principally designed to drive building and property develop-

ment by using tax concessions to encourage wealthy investors to invest in properties not equities. The Hawke Government abolished negative gearing for properties bought after 17 July 1985. However, this reduced the attractiveness of property investment, such that by 1987, falling house and rental prices and pressure from the property industry forced a reversal of the policy altogether.

In 1999-2000, the Howard Government halved the capital gains tax for investors who held the asset for over one year. As incentives to invest in increasingly lucrative growth assets such as property grew enormously, so too did the number of property investors. These price trends can largely be attributed to the combination of negative gearing and capital gains discounts, and form part of the explanation behind the persistent rise in house prices.

The effect of negative gearing on property prices The factors that have driven the recent skyrocketing of Australian property prices, especially in Sydney and Melbourne, are subject to much debate, but broadly include negative gearing, unprecedented foreign investment and record low interest rates.

Negative gearing arguably drives property prices higher by facilitating what the RBA termed ‘ongoing strong speculative demand.’ An increase in investors’ willingness to invest causes property prices to increase, and this rise in speculative investing can also lead to volatility in

property prices. This is because investment levels are prone to small fluctuations in sensitive factors such as interest rates, consumer confidence and exchange rates.

Therefore, abolishing negative gearing may cool down property demand and reduce market volatility, allowing property prices to follow a more sustainable, long-term growth pattern.

However, as property owners seek to compensate for the loss of their tax shield, abolishing negative gearing may merely shift the economic burden away from the Government and instead onto tenants, who must now pay higher rent.

Another point of contention emerges in identifying the winners from negative gearing. A 2003 RBA paper on housing affordability stated that negative gearing is “particularly attractive to individuals facing high marginal tax rates,” which is unsurprising since high-wealth investors may negatively gear several properties without restrictions in order to greatly reduce their taxable income. This then shifts investors out of the highest marginal tax-rate bracket into lower tax brackets. As such, critics of negative gearing suggest that negative gearing entrenches inequality by allowing high-income earners to reduce their effective tax rate.

Another criticism frequently levelled at negative gearing is that it encourages property investors to act in a speculative and risk-seeking manner, as potential losses can be offset. In fact, negative gearing has been referred to as a ‘tax avoidance’ strategy that greatly diminishes the Government’s tax revenue and its ability to provide services.

What needs to happen?

It is incredibly difficult to specify the precise impact a change in Australia’s negative gearing policy would have on prices and housing affordability. Both these outcomes depend heavily on many other often intangible factors, such as foreign investment levels and consumer confidence.

In the case that a policy alteration is necessary, the 2009 Henry Tax Review suggests that any changes must be made very gradually, so as to not restrict the supply of the rental properties, cause excessively volatile market disruptions or drastically impact upon public and political opinion.

This is especially since any announced changes to negative gearing may also shatter investor confidence.

Property makes up a huge proportion of Australia’s economy, and strength in the property market is relied upon by other auxiliary industries such as the construc-

tion, manufacturing and financial sectors.

It is therefore crucial that any decision to limit negative gearing, thereby potentially impacting property investment and prices, takes into consideration the flow-on impacts that this may have on other economic sectors.

It is perhaps more plausible for the Federal Government, in conjunction with State Governments, to explore alternative mechanisms to negative gearing that substantially improve property prices and affordability. The Henry Tax Review advocated a focus on non-tax policies, with a strong case for policies that incentivise new property construction. This would address the supply shortage in the Australian property market, particularly in Sydney and Melbourne, while also increasing affordable housing and boosting auxiliary industries.

Ultimately, the economic issue of negative gearing and housing prices seems set to be, for better or for worse, determined instead by political forces. Given such political and economic uncertainty, the future of property prices in Australia looks just as uncertain as ever, and this is perhaps all that politicians and economists may form consensus on. ■ www.insideenterprise.org | 24

Jessica Smith

Finding Wonderful Is it too late for Australian retailers to contest the international invasion?

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he eruption of online shopping, the steady stream of incoming international competitors and the continued fragility of the domestic economy have all significantly increased the challenges faced by Australian retailers. Additionally, technological developments, a declining Australian dollar, increased housing costs and rising unemployment rates have continued to reduce consumer confidence and suppress growth in the retail sector. These challenges have led the mainstream media to herald the death of Australian retail. However, given the easy accessibility to overseas goods, online retail continues to be successful despite weak consumer demain, with online sales growing by 12.4% last year.

Nevertheless, online shopping accounts for a relatively small percentage of Australia’s total retail spending – $19.3 billion was spent online, compared to $294.4 billion in ‘brick and mortar’ retail.

The entry of international players establishing physical stores has significantly disrupted the Australian market. Uniqlo, Zara and H&M’s 2015 Australian sales totalled $460 million, and it is estimated that their market share will double by 2017.

Local companies struggle to compete with these international players’ economies of scale, well-established online channels and ground-breaking in-store experiences. It is estimated that Myer and David Jones have seen their combined market share decline from 15% to 13% in the last eight years, leaving them trailing behind despite significant investments in online sales platforms.

However, are Australian retailers so easily 25 | www.insideenterprise.org

accepting of defeat as the media leads us to believe? Myer’s new all-compassing strategy suggests that their answer is a resounding no.

Myer: An Australian Icon Myer, with its long and evolving history, is an icon of Australian retail. Since opening its first store opened in Bendigo, Victoria in 1900, Myer’s steady cross-country expansion has seen that number now grow to 67 stores. Since the 1950s, Myer has focused on making shopping exciting by delivering instore entertainment and retail theatre. The Bourke Street store’s Christmas windows first appeared in 1956, and they have since become part of the Australian Christmas tradition.

The 1980s saw significant expansion, with the acquisition of Grace Brothers followed by a merger with Coles – at the time the largest merger in Australian corpoRECOGNISING THE INTENSITY OF THE COMPETITION THEY NOW FACE, MYER’S NEW STRATEGY INVESTS $600 MILLION OVER FIVE YEARS rate history. The 1990s saw Myer further corroborate this equity through a focus on Myer Exclusive Brands and a loyalty program, Myer One. Myer’s company structure remained relatively stable up until its public listing in 2009. However, it was not until 2014 that

an extensive rebranding strategy saw the foundations of major changes establishes, especially in customer service, merchandise offerings, store layouts and in-store experience. The slogan 'Find Wonderful' replaced the overly familiar and tired jingle 'Myer is my store', and reflected a more aspirational approach to marketing and company strategy.

Despite challenges over the last five years, Australian retail still maintains healthy profit margins, with overall sales improving 3.2% last year. 130 million customers visit Myer each year, which fuelled continued success in Cosmetics, Childrenswear and Entertainment categories. However, Myer’s Womenswear category continues to underperform, mostly due to the growing presence of international competitors.

To ensure long-term success, Myer must adapt nimbly to this new hypercompetitive market. Consumers are showing little loyalty to Australian brands like Myer that struggle to adapt to e-commerce, where a greater range of cheaper and higher quality goods are available. Myer, like many other retailers, has invested heavily in its online sales points. However, online sales only comprised 2.8% of Myer’s total sales in 2015, partly due to the inadequacy of its existing merchandise, technologies and supply chains.

A Strategy for the Future Myer’s new strategy is informed by these challenges and inadequacies. Richard Umbers, Chief Executive Officer and Managing Director, describes ‘The New

Myer Strategy’ as “an energetic revitalisation of Australia’s best-loved retailer,” explaining that “it builds on our proud history and looks to the future with great optimism.”

Myer aims to emulate other international department stores that have maintained relevance in a competitive digital market, including Nordstrom and Macy’s, which source 16% and 19% of their sales online respectively. Recognising the intensity of the competition they now face, Myer’s new strategy invests $600 million over five years. Underpinned by Myer’s desire to “bring the love of shopping to life,” Myer’s strategy revolves around passionate people, personal connections, inspiring brands, wonderful experiences and embracing change.

Passionate people and personal connections In 2015, Myer offered voluntary redundancies to several full-time and part-time employees, and increased their proportion of casual positions. This significantly reduced wage costs through promoting flexibility in rostering. Through this, Myer can cater to varying demand in peak and off-peak periods. The new strategy furthers this focus on improved customer service through upskilling team members and improving training programs.

Inspiring Brands Myer can only compete with the diverse range offered by international competitors by re-energising its current range. The introduction of a ‘customer-led offer’ will concentrate on delivering relevant and demanded brands, with store offerings tailored according to the customer demographic profiles of each store. Topshop and Topman were the first in-store brands to be announced, with Myer also purchasing a 25% share in the brand’s Australian franchise. This is a smart move for Myer, clearly adopting an ‘if you can’t beat them, join them’ approach to its international competitors. To make space for these new, ‘wanted’ brands, underperforming brands will be reallocated, enabling Myer to remain relevant with consumers.

Wonderful Experiences Alongside improvements to customer service, Myer aims to provide more ‘wonderful’ in-store experiences through elevated visual merchandising, upgraded fitting rooms

and enhanced lighting. To add to Myer’s long-standing ideal of providing an engaging experience, special events are also being introduced. From live cooking demonstrations of kitchen appliances sold instore, to magicians entertaining children with magician kits from the toys department, Myer is working to present its products in a unique, engaging manner. ‘Giftoriums’ act as onestop-shops for customers’ gift-giving needs for all occasions.

Myer’s brick and mortar stores remain strong, especially as consumers come back to physical stores for services and experiences that just cannot be replicated online.

Myer aims to replicate international retailers in making the physical shopping experience fun, social and interactive. Recently closed for refurbishment, the Warringah store will undergo a company-first rejuvenation. It will become a prototype for the new strategy, incorporating additional services such as cafés and pop-up stores.

Embracing Change It is exactly this insight that has led Myer to prioritise creating an omnichannel business structure. Improving in-store experiences, while important, should be complemented by an accessible online sales platform. Offering a ‘Click and Collect’ service, where customers make purchases online and collect them from their nearest store, as well as in-store online ordering via iPads, provides greater accessibility and convenience for Myer’s customers.

On the Way to Wonderful?

Myer’s new strategy therefore directly addresses the complex and challenging Australian retail environment. Given the sheer amount of change within the company, Myer’s ‘Transformation Office’ helps oversee the execution of the ‘New Myer’ strategy, by supporting investment in technology, systems and processes to ensure that Myer’s organisational culture remains executionoriented and future-focused.

The 1.7% increase in total sales last financial year clearly indicates that the new strategy is already effective. However, there is still a long way to go, with Myer targeting 3% average sales growth between 2016 and 2020. As net profit after tax decreased by 21.3%, the significant capital costs associated with investing in such a strategy, including improving online channels and supply chains, must be examined closely.

While the strategy appears well-informed, the early stages of implementation makes success difficult to gauge.

Nevertheless, this year Myer has already been nominated for a World Retail Award for its Christmas advertising campaign, and won a Retail Customer Excellence Award for In-Store Technology Implementation Experience. This suggests that even though the fight against international and online competitors will never truly end, Myer is nevertheless now well placed to finding wonderful. ■ www.insideenterprise.org | 26

Chelsea Leung

Workspaces Worth Working In: The Changing Face of Office Design T

he workplace environment has rapidly evolved away from the office cubicles of the 20th century, changing the way we work and interact with co-workers. From the open office to hot-desking, the campuses of Silicon Valley to virtual teams, employees are experiencing a paradigm shift. Nowadays, companies are recognising the different needs of their employees, and are shifting the work environment to accommodate them.

Connectivity and collaboration Since technology has removed the necessity for face-to-face meetings and replaced them with online interactions, it can be difficult for employees to meet other coworkers from different company divisions.

A report by Knoll, an office design firm, and Unwired, a publishing and events business, found that more and more businesses aim to create office layouts that “engineer chance encounters, and design hubs for people to meet and work together.”

Deloitte in the US, has embraced this collaborative zones trend of by implementing hot-desking. Their Next Generation Initiatives were instigated following research that found that nationally, on average, only 30% of the assigned headcount were accessing their offices daily. Ian Keefe, an associate at Deloitte Financial Advisory Services, recognises the perceived reduction in privacy and increase in noise that collaborative workspaces may bring, but 27 | www.insideenterprise.org

says the Next Generation Workplace has “provided the best opportunity to collaborate with co-workers,” resulting in quicker solutions development and improved overall productivity.

A 2011 survey by Deskmag, an online magazine about contemporary co-working spaces, found that of the 1,500 workers surveyed across 52 countries, 75% reported an increase in productivity since working in a collaborative space, 80% reported an expansion in their business networks and 92% reported an increase in their social circles.

Keeping employees satisfied A common secondary goal amongst companies implementing collaborative, interaction-inducing workspaces is raising employee satisfaction. Community-centric hubs, such as gyms, open-plan cafeterias and games rooms, play a large part in promoting a sense of community, preventing employees from burning out, and achieving that much sought-after ‘work hard, play hard’ balance.

Almost an archetype for the modern workplace, the Twitter office in Sydney boasts a ping-pong table, arcade machine, an Xbox One and pop-up bar for Friday drinks. However, using employee happiness as a design measurement is not exclusive to big tech companies. John Arthur, Chief Operating Officer of Westpac, says that Westpac’s new Barangaroo office was

designed with “providing our people with an environment to enable them to do their best work.” As a reflection of Westpac’s commitment to their staff’s needs, employees were able to provide direct input into office design, resulting in a prayer room, a fully equipped medical centre, a wellness centre and a kitchen, where staff can undertake cooking lessons.

Offices that introduce employee-oriented customised workspaces not only experience lower levels of work impairment stemming from absenteeism and presenteeism, but alsoincentivise talented workers to stay onsite, increasing employee loyalty.

Flexible working: how to adapt to the changing needs of employees Changing societal norms and values have seen employees demand more flexible work arrangements to balance their otherwise busy lives. Workers usually spend 49% of their time at the company’s head office, with the rest of their time divided between other offices, client sites and working from home. According to research by global job website Indeed, job seekers in Australia are searching for flexible work arrangements 2.5 times more often than they Catering to this growing need, EY now offers all employees flexible working arrangements, which are determined with the manager through their Workplaces of the Future Program. Similarly, Deloitte has established a direct relationship between

flexible IT policies and employee satisfaction and retention, especially among Gen Y and Gen Z workers. The result? Improvements in employee engagement, and an increased retention rate of high performers by up to 100%.

However, employee flexibility risks blurring the line between work and home life, which can impact the quality of work and the quality of employee’s lives. When employees are given the option of working from home, there is sometimes the expectation that they will always answer work calls and emails, regardless of the time.

As Benoît Hamon of the French National Assembly puts it, “Employees physically leave the office, but they do not leave their work. They remain attached by a kind of electronic leash – like a dog.” France has attempted to rectify this, introducing a Bill in Parliament, that proposes to give workers the "right to disconnect" outside of office hours.

Resource efficiency An Unwired report commissioned by Microsoft found that desks are in use only 47% of the time, and meeting rooms are in use only 50%-60%. The report also found that the average annual cost of providing a desk in London or New York is $18,000.

Given the inevitable growth within the workforce and the density of commercial space in urban areas, the most viable option for employers would be to drive productivity growth whilst managing limited office space and resources through strategies such as hot-desking.

Another important resource being maximised through workspace design is human capital. Companies that recognise the unique strengths of their employees and ‘customise’ the work environment to suit their needs gain the most out of these employees. The ‘Quiet Revolution’ has picked up momentum in recent years, as the strengths of introverts become more recognised. While introverts can enjoy collaboration and teamwork, they require private, quiet spaces to recharge. Given this, a company’s investment in quiet workspaces would be an invaluable factor that can improve an introverted employee’s efficiency.

Conversely, extroverted employees would be more productive in a shared workspace where they can be stimulated by the presence of others.

Company culture Workspaces are now a reflection of company culture. The campuses of Silicon Valley’s tech giants are leading examples. For companies such as Google and Facebook, goals of transparency, collaboration and innovation have been purposefully designed into their offices and surrounding areas.

At Google, the new complex being designed is a first in office design. The building features moveable glass panels that can be adjusted to adapt to Google’s new and emerging product areas. Google also seeks to invest in the local community, by creating bike paths and retail opportunities for local businesses. Similarly, Facebook embodies its mission of connecting people through its large, open space office. "You can't really can't walk through this space without bumping into people," says Lori Goler, Chief People Officer at Facebook.

This change in environment has also flattened workplace hierarchies by placing senior management amongst regular employees. In Facebook’s large open-plan headquarters, Chief Executive Officer Mark Zuckerberg sits in the middle of the room. This symbolically puts all staff on the same level and as such, senior management become more accessible and appear more

approachable to their subordinates.

The future of office workspaces Changes in workspaces have not only been driven by external factors such as innovating to remain competitive, but also by internal factors such as maintaining employee satisfaction and resource efficiency. Companies have come to realise that performance should not be determined by physical presence at the office, but rather on the timely completion of tasks.

As more young people enter the workforce, their changing expectations of work environments will encourage companies to reflect on their core values. Firm should focus more on the social responsibility in their office design and flexible work options in order to attract high-quality employees. This begs the question – how will our values and expectations shape the future of workspaces? ■

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Interview with the founders of

Ed Kearney & Matt Schiller

By Joseph Shen When we first met Ed Kearney and Matt Schiller, co-founders of graduation gown retailers GownTown, in their offices at the Fishburners startup hub, we found them busy fashioning an old shopping cart into a chariot.

“Have you seen Macklemore’s music video for ‘Downtown’?” Ed grinned, as he attached cardboard flames to the cart. “We’re going to make a parody of it.”

It has been these tongue-in-cheek marketing projects that have given GownTown its distinct youthful aura. The latest video features a remix of Macklemore’s hit single ‘Downtown’, with the rapper holding the reins of a shopping cart as he is pulled along by riders on hoverboards. Another video features surfers riding waves wearing gowns.

These videos have allowed GownTown to disrupt the university graduation market by selling gowns to students at prices lower than renting.

The idea for the startup was born out of a long friendship between Ed and Matt. They first partnered at New College at UNSW, writing and producing revues for college together. As their partnership developed, they became more interested in business, competing in case competitions and constantly coming up with new business ideas. This was 29 | www.insideenterprise.org

the platform for GownTown’s growth, which took root when they were dissatisfied with the price and quality of gowns available at their own graduation.

Ed’s passion for business is about curiosity and his desire for adventure. A civil engineering graduate, he appreciates the problem structuring skills that he learned during his degree. But simultaneously, he’s never been one to turn down an adventure. He participated in the Afghan Ski Challenge, where he skied over four kilometres in central Afghanistan. To Ed, business is all the same. “I like how I can choose my own adventure in business. Being my own boss is very appealing.”

Matt shares Ed’s intellectual curiosity. He established the Australian Medical Student Journal, a national peer-reviewed biomedical journal, while studying Medicine and Philosophy. He also won prizes for his numerous philosophical essays.

Together, their curiosity led to the creation of GownTown, which has achieved something very rare in the world of startups: profitability within months of inception. However, this didn’t come without its challenges, as Ed and Matt discovered along the way.

Ed describes how the seemingly easy things were often the most difficult to learn. One

“I like how I can choose my own adventure in business.

Being my own boss is very appealing.”

example was digital marketing. “You think you have a grasp on things from your experience within university societies, but in the real world, it’s a lot more complex.

Being able to understand the tools and mediums available to you is critical – such as when it is appropriate to use videos versus glossy pictures or if we’re targeting different demographics, whether to use Facebook or Pinterest. These principles were an enormous learning experience for us.”

Other obstacles thrust Ed and Matt right into the deep end of business operations.

As two Australians in their early 20s, they managed to quickly learn the ins-and-outs of manufacturing in China – from overseeing Chinese factories and networking at trade fairs to learning about textiles, dyeing techniques and mastering the art of negotiation.

Matt recalls one instance in China where they thought that the best way to make friends and build trust with a factory boss was to go to a bar and drink lots of green tea and rice wine. As crazy as it sounds, Matt emphasised that, compared to Aus-

tralia, personal relationships are much more important when doing business in China.

He visits his partners in person as much as possible rather than communicating online.

With creativity, a lust for learning, and a penchant for doing rather than thinking, the co-founders of GownTown have achieved considerable success within a short period of time. Far from just providing graduates with gowns, GownTown has a mission to make graduation day a better experience overall. “It’s about maximising the value and enjoyment of an important day in one’s life, and acknowledging that graduation represents a major life transition for young adults.”

It is clear that the co-founders both have a greater vision for GownTown and bigger business goals in the future. They have recently started GownTown’s expansion into the UK and have just launched a new start-up called Snappr.

Inspired by the experience of delivering graduation photography, Snappr launched in May 2016 and connects photographers in Australian cities to a variety of shoots,

including product shoots, fashion shoots and social and company events. “It’s kind of like the Uber of photography – we saw a gap in the market and the response has been phenomenal.” As they discuss their newly minted business, there is a looming feeling that this is just another chapter in their book of future successes.

Being serial entrepreneurs, Ed and Matt keep a running list of ideas for future projects. They have two pieces of advice for potential young entrepreneurs thinking of building the next successful startup. The first is to routinely devote time to be creative. “Set half an hour to an hour aside each week to be creative and to jot down your ideas.” The second is to “get into something at University! You don’t realise how much time you had until you’re working a full-time job. It’s the perfect time to try something. Even if it doesn’t work out, at least you’ve dipped your foot into the water and can learn from that experience.”

Judging by the success of GownTown, it may be a good idea to take their tips on board before graduation day. ■ www.insideenterprise.org | 30

An interview with

SAM NICKLESS

By Rina Yang “I think the very linear progression of a career is quite outdated,” Sam Nickless says. “It should be a zig-zag from different opportunities.” His attitude is a reflection of his own career, which has seen him move from city to city in Australia, and travel on numerous offshore work assignments.

Most recently, he has taken up the mantle as Chief Operating Officer of law firm Gilbert + Tobin."

W

hen I was younger, I wasn’t entirely sure what I wanted to do,” Sam says candidly. “I’ve never been particularly programmatic about my career.”

In the early 1990s, he obtained a Bachelor of Economics at the University of Adelaide and followed it with a Law degree. It was with the possibility of a legal career in mind that he moved to England to study a Bachelor of Civil Law degree at the University of Oxford. “As I got towards the end of university, I did get quite set on the idea of being a lawyer,” Sam admits. “That was kind of where my head was.

But I was always interested in business. It was always the commercial side of law that I was interested in.”

While he was at Oxford, he was approached

by McKinsey & Company and promised the opportunity to work in a firm that was going to change the world. It was an offer too hard to resist, and Sam decided to put his thoughts of a career in legal practice aside – at least temporarily. “I still thought that I was going to become a lawyer, but I decided that I wanted

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to try something different for a year or two.”

“Something different” began with an aluminium extrusion plant project, which brought him back to the Southern Hemisphere – not home to Australia, but to New Zealand. “It was quite interesting for someone who had been studying law and economics for years,” Sam says. “I was on the ground, trying to reduce the cost of packaging aluminium extrusion parts.”

A year with McKinsey became two. Two became three. Eventually, Sam worked with the management consulting firm for a decade.

One of his favourite projects was his work for the New Zealand Dairy Board, the now defunct single desk seller producer board that was responsible for the export of New Zealand dairy products until 2001. Sam busied himself with helping reset the structure of the dairy industry to deregulate the single desk structure and introduce a market-based pricing mechanism for milk. The result was the emergence of Fonterra, a global leader in the dairy industry, after the Dairy Board was merged with two

dairy cooperatives.

Throughout his time with McKinsey, Sam watched businesses and economies grapple with the dramatic shifts brought about by the acceleration of globalisation.

“Deregulation and digitisation were making things more global, more quickly, and that was a major theme for a lot of our consulting,” Sam says. “There was a lot of overseas travel for me. It’s hard on the family, but it was very exciting, that feeling of being connected to the rest of the world.”

He looks back on his work during his McKinsey years with fondness. “It was an amazing place to work,” he reflects.

“Especially for the ability to be involved in important business decisions at a very young age, and for the variety of experiences of working in different industries and in different types of functions, whether it was strategy, or operations, or marketing.”

In 2006, Sam transitioned to National Australia Bank in Melbourne as a General Manager – first for the Strategy & Business Development department, and later the Cards & Personal Loans department.

This move was a breath of fresh air for him, and allowed him to look at business from another perspective. “I wanted to not necessarily just advise and make recom-

mendations, but be part of the organisation that delivered on them,” Sam says. “It was an important decision for me, to move from the advisory professional services role I was in to a commercial, corporate role in a client organisation. You have to think about a lot of complications that you don’t get to see as a consultant. Have we got the resources? Have we got the people? Have we got the right people? Whatever opportunity we’re going after involves competing “THE OPERATIONAL MINDSET OF MEETING TARGETS GAVE ME A REAL BUZZ AS A LEADER, AND A SENSE OF CONTRIBUTION,” for resources and funding. Those are all realities of making something happen in a big company.”

It was at NAB that Sam learned that he enjoyed not only the long term strategic thinking but also the accountability of delivering operational performance. While he was in the Cards & Personal Loans department, he always looked forward to receiving the daily e-mail that showed how

many credit cards had been opened the previous day – milestones symbolising progress. “The operational mindset of meeting targets gave me a real buzz as a leader, and a sense of contribution,” Sam explains.

After leaving NAB, Sam worked as Business Transformation Director and later Managing Director of Emerging Businesses & Strategy at Australia’s largest gaming machine manufacturer Aristocrat Leisure, and Head of Property Solutions for property behemoth GPT Group, where he represented GPT on the Board of Directors at Silicon Valley startup LiquidSpace.

Sam preaches what he practices, predicting that in the future, people are going to move between firms more often and have more of a portfolio career, which in fact means often doing more than one job at a time, and being involved in more than one venture and opportunity at a time.

“It’s the opportunities that are in different parts of the market, or give you a different type of experience, that are the most exciting.”

With this mindset, Sam chose last year to travel across another “zig-zag” and accept an appointment as the new Chief Operating Officer of Gilbert + Tobin, the leading independent corporate law firm based in www.insideenterprise.org | 32

Technological changes can either be a destroyer of value for companies, or an opportunity to create new value. That’s why I watch them so closely.

Sydney, Melbourne and Perth. As a university student, he had imagined himself working as a lawyer. Now he oversees the business operations of a large commercial law firm as one of its top executives. “Interestingly, it’s a lot more fun than I thought it would be when I left my dreams of becoming a lawyer twenty years ago,” Sam laughs.

As Chief Operating Officer, Sam is responsible for managing human resources, finance, marketing, and IT. He primarily focuses on team leadership and people management, and seeking opportunities for Gilbert + Tobin to innovate and change the legal industry. Sam ticks his daily tasks off on his fingers: “On most days, I catch up with the managers of different departments to talk about what’s on their agenda and what priorities they have. I’ll also spend quite a bit of time with the partners, which can involve discussing strategies about where we’re going with the practice.

Quite often, I’ll meet with external providers to discuss their services, or what else we can be bringing to our business. Some days, we’ll have board meetings as part of the normal governance of the firm.”

One of the most enjoyable aspects of his role is working with the technology team or the innovation team, problem solving or brainstorming. Sam admits that he’s fascinated by technology. In particular, he keeps an eye on artificial intelligence and blockchain – two areas he believes represent the acceleration of technology development.

“Human beings think in a linear way.

We think of progress as a slope, but it’s exponential. Some technology might not be quite there yet, but it will come – and when it comes, it will come fast.”

His interest is not limited to mere 33 | www.insideenterprise.org

curiosity. In fact, Sam’s outlook on the far-reaching implications and potential opportunities posed by technology is almost Darwinian. “We need to be thinking about what these changes mean, and whether there are ways to participate or not,” he says. “Technological changes can either be a destroyer of value for companies, or an opportunity to create new value. That’s why I watch them so closely.”

Unsurprisingly, Sam is keen on the practical benefits of technology for lawyers.

One of his constant goals is freeing lawyers from high volume, high labour activities that produce relatively low value for the firm. “We’re trying to get our technology team much more involved in the practice of law. Our tech unit is actually working a lot with our lawyers now to figure out what takes a lot of time, but can be automated.

We’ve got a couple of coders who can go away and build a solution that can eliminate some of that workload. It’s unlocked a lot of value.”

In gaming, in property and even now in law, Sam’s work has always touched on disruption. “I like to be in the new business and innovation edge of an industry,” he says without affectation. At GPT, he had found himself working in the conservative property industry, but saw – and seized upon – the use of hot-desking and open plan office workspaces as an opportunity to adapt. It was his passion that led GPT to invest in LiquidSpace, a real estate tech company that operates similarly to Airbnb by providing a platform to share vacant office space.

Similarly, the legal industry is notorious for its adherence to tradition, but Sam is actively working to ensure that Gilbert + Tobin stays ahead of the curve. Not only

has the firm jumped on board the open plan trend by doing away with office walls at its new Sydney location in Tower 2 of Barangaroo’s recently developed International Towers, but it has also recently invested in startup LegalVision. Sam spearheaded the partnership between the two firms – one large and established, the other a growing online-based newcomer – in the interest of sharing work and knowledge.

“For the traditional part of the legal industry, disruptors like LegalVision can be a threat in the long-term, and you can just ignore them or fight them,” he says. “But you can also embrace them, and work out what you can learn from them, tapping into that energy that comes from having an association with somebody doing something different in the market.”

This, Sam suggests, is the future for large incumbent companies in every industry.

“We’re seeing an emergence of corporate venture capital arms – they’re an important source of venture funding now. Some companies that don’t have a venture fund will cut strategic deals with startups. It’s a way of accessing talent and ideas that you wouldn’t necessarily have in a big company.”

Though his vision for every company he has worked for is forward-looking and distinctly futurist in hue, Sam stays largely in the present in regards to his own career.

At the heart of his “zig-zagging” path across jobs and continents over the last twenty years has been a strong emphasis on enjoying his work in the moment. “That’s the question I always ask myself – is what I’m doing fun, and enjoyable, and challenging?

That’s how I feel about where I am now.” ■

The Asia-Australia Education Revolution: Interview with Natalie Cope

By Jonathan Soerjoko Not wanting to join the mass of Australians taking a gap year in Europe, Natalie Cope left her home in country Victoria to immerse herself in a different environment. At only 18 years old, with no prior language experience, Natalie found herself in China. The decision changed the course of her life, leading her to the role of Manager, Partnerships and Development at Asialink Business, and now as the new Chief Executive Officer (NSW) of the Australia China Business Council.

www.insideenterprise.org | 34

Importance of Language Natalie’s avenue into Chinese culture initially came through learning conversational Mandarin. Her daily experiences and interactions allowed her to build affinity with the country and its people. Natalie notes, “Like any form of diplomacy, language is about shared connection.”

Natalie’s personal experiences in China were the first step in a long journey that led her to Asialink Business in 2012.

Following her gap year, she later returned to the region for a series of university exchanges and internships, as well as her first job as a lawyer. In a 2015 article written for the Australian Financial Review, Natalie argued that there is “no substitute for in-country experience.” The personal, character-building experience allowed her to gain real cultural understanding and develop rich and meaningful relationships. She adds that “having local knowledge and long-term relationships based on trust and mutual understanding” was “paramount to commercial success.” A firm believer of first-hand cultural experiences, Natalie continues to attribute many of the opportunities in her career to the leap of faith she took at a young age.

Given the oft-repeated importance of China for Australian trade, it is surprising that the study of Mandarin has actually fallen in recent years. According to Dr. Jane Orton, in 2015 only 400 Year 12 students studied Chinese as a second language in Australia — 20% fewer than in 2008. Other Asian languages such as Indonesian are also experiencing a decline in enrolments, with more Australians studying Indonesian in 1972 than in 2015.

With language being the key to linguistic and cultural capacity, especially in Asia, Natalie points out that there could be a case made that the Australian education system lacks support for those wanting to study Asian languages. At the same time, she notes that the decline in language learning should not deter university students from engaging with Asia. Natalie highlights that “having an intermediate, or even basic understanding of Mandarin, coupled with an appreciation of the culture in all its different forms, is sufficient enough to open doors.”

Asialink Business During her time in Hong Kong, where she was actively involved with the AustraliaChinese Youth Association (ACYA), Natalie became familiar with Asialink.

Years later she decided to step out of her law career to join the pre-eminent organisation advancing Asia relations. As an organisation,

35 | www.insideenterprise.org

Asialink Business has a national mandate to develop an Asiacapable workforce.

It delivers on this by focusing on three pillars of activity: training programs, ranging from understanding business cultures to country-specific negotiation strategies; information products, such as case studies and countryspecific information packs; and advocacy, through Asia-focused networking and information events that provide access to unique networks of like-minded business leaders.

A central aspect of Asialink Business is its unique understanding of ‘capability.’ In 2012 the Asialink Taskforce, in collaboration with Boston Consulting Group, published a research report titled ‘Developing an Asia Capable Workforce’, which identified the individual and organisational capabilities that are critical for business success in and with Asia. Upon elaborating on the individual capabilities, Natalie emphasises that language proficiency, although important, is only one aspect of Asia capability. A business executive must also have a sophisticated knowledge of Asian markets and environments, long-term trusted Asian networks, and the capacity to deal with the nuances of different types of relationships, especially those with Asian governments.

In fact, many business leaders who enrol in Asialink’s training programs frequently lack cultural capability when dealing with Asian businesses. This inadequacy would ultimately prevent them from knowing how to navigate complex cultural relationships with Asian governments, or how to negotiate and influence within an Asian context. With aims of expanding and growing into Asia, a lack of cultural understanding on the individual level inevitably affects the organisation’s performance as a whole.

Within the Asian Century, those with the appropriate cultural and technical know-hows are in high demand by businesses.

Natalie states that she speaks “day-to-day with businesses that are crying out and desperate for people with Asia capabilities.”

Although Asia is by no means a homogenous continent, there is a shortage of culturally competent managers across the entire

region, with only 23% of Australia’s largest companies having on-the-ground staff.

Capturing the Asia Momentum Natalie firmly believes that the trajectory of Australia’s involvement in Asia will grow “exponentially” over the coming decades. However, through her wider career and her time at Asialink, she acknowledges that there is still a lot of work to be done in terms of building up Australia’s individual and organisational capabilities. Indeed Australia does have some significant catching up to do, given that only 12% of organisations in 2014 have experience in doing business in Asia. Hence, despite the wide recognition of Australia’s place in the Asian Century, there still exists enormous potential to build even greater partnerships with Asia that can significantly drive Australia’s momentum within the region.

Luckily, Natalie believes that university is the perfect environment to hone these skills. When asked on what advice she would give to university students, Natalie said that she would investigate and explore “every exchange opportunity, every internship opportunity, and every work opportunity within the Asia region.” She added that there are an abundance of existing opportunities – the New Colombo Plan, the Australian Consortium for In-Country Indonesian Studies, and the Westpac Bicentennial Foundation Scholarship – that facilitate programs and various forms of financial assistance for students undertaking study within the Asia region. Youth dialogues such as the Australia-China Youth Dialogue, of which Natalie is a founding member; and the Conference of Australian and Indonesian Youth, the Indonesian equivalent; also provide useful public platforms to engage and network with emerging Asian leaders through three to four day conferences.

Natalie also suggests that Australian students should not neglect the international student communities of their own universities. This is because they have strong ties to their home countries, and in the future will either “stay and develop into great professionals or eventually return back to their home countries, which are extremely important for Australia’s ongoing economic, political and security engagement.” Natalie therefore encourages all students interested in the Asia relationship to first start at home, reaching out to international students within their own universities, as they are an accessible, relevant and logical first point of contact.

The formative years of Natalie’s life spent in Asia shaped her into the person she is today. Her time at university was central to this, for as an undergraduate student she had the freedom and the time to dedicate herself to new pursuits, such as learning Mandarin and immersing herself in the Chinese culture. Although currently studying an MBA at the University of Sydney Business School, she admits that the commitment of full time work in Asia makes the experience entirely different as a postgraduate. Natalie is not sure if she could have gone down the path she did if she had only explored Asia after she entered the professional world. In recognising the need to explore the multitude of vibrant cultures and boundless opportunities, Natalie therefore encourages all students to immediately take the plunge and immerse themselves in Asia.

Jonathan Soerjoko is undertaking an internship at Asialink Business. At the time of writing, Natalie was working at Asialink Business, but has since moved into a position as the Chief Executive Officer (NSW) of the Australia China Business Council.

www.insideenterprise.org | 36

37 | www.insideenterprise.org

StudeNt Room Financial Management Association of Australia Alexander Orsmond

S

ince its inception in 1990, the Financial Management Association of Australia (FMAA) has sought to erode barriers between students and industry, facilitating interaction between professionals and members of the society. With over 4,500 members across five universities, the expansive scale of the FMAA has allowed it to serve as a principal mechanism for enhancing the employability and professional skills of members around the country.

To achieve this, the FMAA runs frequent professional development workshops, case study competitions and networking events throughout the year.

Down-to-Business Luncheon A highlight of the FMAA calendar, the annual Down-to-Business Luncheon provides a unique forum for students to network with industry professionals and sponsor representatives while enjoying a three course meal. This year, the event featured 25 sponsors that operate in a variety of industries including financial services, professional services, management consulting, legal services and public policy. The event featured a keynote speech by the Global Head of Macquarie Capital Tim Bishop, who shared insights into the lifestyle of a financial professional and the future of the industry as a whole with students.

Financial Services Evening Distinct from other networking events, the Financial Services Evening serves as a key source of information for members seeking to gain a deeper understanding of career pathways available in the financial services. The event features two panels of sponsor representatives, one comprised of junior professionals and one of more senior industry figures. Junior panellists are encouraged to share with students their experiences of applying for internships within the industry and starting their career, while senior panellists provide valuable insight into the trajectory of the industry as a whole. Students are prompted to compose their own questions for the panels to ensure they gain the greatest value from the event.

Management Case Consulting Competition The national Management Case Consulting Competition (MCCC) has expanded rapidly since its establishment in 2011, involving over 240 teams from various campuses around the country last year. Teams are given a case study that provides background information on a firm and its industry, and are tasked with devising creative solutions supported by financial reasoning that would improve the efficiency of the company’s operations and allow it www.insideenterprise.org | 38

to capture a larger market share. The case studies are designed to reflect real-world issues that industry professionals may face, most recently requiring students to consider improvements that could be made within the online shopping division of supermarkets.

The final of the competition is judged by professionals from the consulting industry, and is open to any members of the FMAA who want to learn more about what is involved in creating a suc-

cessful company strategy pitch. The event is preceded by a networking session with representatives from a number of management consulting firms that sponsor the FMAA. To find out more about the FMAA and how to become a member, visit their website at www.fmaa.com.au.

Grad Mentor & the Financial Planning Student Group Arjun Sidhu

A

lisdair Barr, a leading figure in the financial planning industry, is the Director of Grad Mentor and former Head of Commonwealth Financial Planning Pathways at Colonial First State. A supporter of student organisation, Financial Planning Student Group, he shares his insights on how students can kick start their career in the industry.

“The best part of being a financial planner is the rewarding work you do,” smiles Alisdair. “The interaction between a client and planner grows to become a very long, trusted relationship that goes through multiple life stages. What attracts people to this profession is the difference and effect that they can have on people's lives.”

However, financial planning is not a career that most students are immediately drawn to. Grad Mentor aims to raise awareness of how exciting and rewarding the financial planning industry is and the roles that graduates can get involved in. The organisation provides many opportunities for students to attend events, meet employers from leading financial planning firms and participate in mentorship programs. Grad Mentor also works with the Financial Planning Student Group (FPSG) to reach out to more students.

FPSG is a non-profit organisation that hosts financial planning

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insight presentations across the University of Sydney, the University of New South Wales and Macquarie University. At these events, speakers provide relevant insights into the industry and students have the opportunity to interact with leading industry professionals.

There are now a lot of opportunities for young graduates in the financial planning industry. “The financial planning industry is an ageing profession,” says Alisdair. “The profession is adapting to new technology, but not as quick as it could be. Young graduates can come in and really shape this profession, bringing in new technology and ingenuity to streamline the process.”

“The ageing population in this profession also means that there's going to be a relatively high percentage of advisors retiring over the next five years. Additionally, there are pressures to reduce the cost of delivering advice and increase the range of services and solutions that financial planners can provide. Technology has to be a solution to that, which new graduates can come in and implement.”

To find out more about Grad Mentor and FPSG, visit their websites and subscribe to the mailing list at www.gradmentor.com.au and www.fpstudentgroup.com.au.

ENACTUS University of Sydney Tara Mahapatra & Doris Xu

Culinary Tales

F

or many refugees that come to Australia, unemployment and social isolation are common experiences, even if they are highly skilled or qualified. Enter Culinary Tales, a social enterprise introduced by Enactus, a non-profit student society at the University of Sydney. Culinary Tales aims to help refugees run their own cooking classes. Not only does this provide them with valuable income and work experience, but it also provides these refugees with a social platform to share their experiences and incredible stories. Enactus believes that food has the powerful ability to forge harmonious connections between people from different cultures and across generations. Culinary Tales runs classes in the community, currently hosted at the Lane Cove Living and Learning Centre.

are able to share their experiences, stories and recipes with the students, are provided to supplement their learning. Culinary Tales has hosted school classes at a number of NSW high schools, including Sydney Girls High School, Cranebrook High School and Cherrybrook Technology High School. The school can choose from either a flexible half-day or full-day program, catered to suit the school’s needs.

Corporate classes In a similar vein, the Culinary Tales team is currently crating a corporate class package that will focus on team-building, whilst also providing an opportunity for corporate participants to engage with the chef ’s culture and story.

For more information on Culinary Tales, visit and subscribe to the mailing Schools program list at http://www.culinary-tales.com. Please email any inquiries or expresCulinary Tales has recently expanded into high schools. Food sions of interest to culinarytales@enactussydney.org. technology or social justice incursions, where refugee chefs

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ENACTUS University of Sydney

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The Pop Up Project

E

consists of a business skills workshop, where students learn integral skills such as marketing and how to communicate in a business environment. This is then followed by a basic culinary skills training on waffle making. The concluding session involves these youths applying the skills that they have learnt during the previous two sessions in a pop-up waffle and coffee stall.

The Pop Up Project has successfully supported 20 students through this workshop in November 2015, with another class scheduled for September 2016.

nactus recognises that one of the biggest issues that plagues society is youth unemployment. The Pop Up Project began in 2013 with the aim to empower disadvantaged youths. The sustainable program enables unemployed youth to acquire experience and skills to increase their employability, independence and confidence. The programs currently target students in Year 10, as Enactus believes that this marks a transitional stage where they can create the maximum impact on Café Internship Program In 2016, the Pop Up Project is also youths’ lives. introducing a new element to the existing workshop, to provide youths with extended 3-day Business and Hospitality experience through an opportunity to intern Workshop The Pop Up Project is working closely at an established café or restaurant. This with NSW schools to deliver its existing will provide valuable hands-on experience curriculum, a three-day business and within a professional environment, where hospitality workshop. Youths selected for participants can interact with customers and the program attend three weekly full-day managers and develop key soft and technical sessions. The first session of the workshop skills. consists of a barista training course, where, at the conclusion, students receive Schools, community groups, cafés and a Barista certificate and a Food Safety restaurants interested in the Pop Up Project Handling certificate. The second session can contact info@enactussydney.org for more

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Page 19 NASA's Marshall Space Flight Centre “Sinai Peninsula (NASA, International Space Station Science, 11/19/09)" https://www.flickr.com/photos/nasamarshall/4150011975/ Attribution 2.0 Generic (CC BY 2.0) Page 21 Luis Ruiz Tito “Inauguración de unidad de cirugía robótica del HOMS” https://www.flickr.com/photos/presidenciard/12752539834/ Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0) Page 28 NASA https://unsplash.com/photos/cIX5TlQ_FgM Pages 30-31 Oliver Wendel https://unsplash.com/photos/5tpf6dSY6WU Page 32 Darkday “Forklift Explosion" https://www.flickr.com/photos/drainrat/16561191592 Attribution 2.0 Generic Page 34 Knowledge Society “Knowledge Society 100 Luncheon” https://www.flickr.com/photos/knowledgesociety/23526424000 Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0) Page 39 ?

Page 41 Travellers travel photobook “Parliament of Australia” https://www.flickr.com/photos/neelelora/8619291874/ Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0) Page 43 Kelly Hunter “Brisbane city traffic trails” https://www.flickr.com/photos/inspirekelly/8751794706/ Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0) Page 45 Ahia “Central Park development across UTS 1, Sydney” https://www.flickr.com/photos/ahia/24088671566/ Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Page 47 Jakob Steinschaden "Facebook HQ" https://www.flickr.com/photos/jaxxxerockwell/5001629382/ Attribution 2.0 Generic (CC BY 2.0) Page 53 https://pbs.twimg.com/profile_ images/592912651598045186/mu0japYZ.jpg (used with permission) Walter “Victoria Harbour, Hong Kong" https://www.flickr.com/photos/18198198@ N07/14503749276/ Attribution 2.0 Generic (CC BY 2.0) Pages 54-55 Bernd Thaller “Shanghai Evening” https://www.flickr.com/photos/bernd_ thaller/16526151761/ Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)

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