Inside Enterprise Issue 5: "Unexpected" by Inside Enterprise

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EDITOR'S MESSAGE Editor-in-chief Marina Yang Deputy Editor-in-chief James Pyo Directors Jenny Huang Howell Sze Sun-Yong Kim General Editor Jenny Chen Editors Clara Wong Daniel Schwartz Angela Cartwright Richard Guan Arielle Stone Publisher & Designer Erica Liu HR Director Guangyong Chuang Board of Advisors Peter Corbett Hugh Simpson

hallenges to the status quo, dramatic technological developments, and innovative disruption: such events in the business world are now common, but remain unpredictable. The fifth issue of Inside Enterprise focuses on these stories of the unexpected. Some of the most powerful unforeseen shifts are those that have affected our daily lives. Our writers have delved into everyday practices of media consumption, such as personal branding on social media, audience fragmentation and piracy, and the popularity of the superhero film genre. They have scrutinised the intellectual property law of the food on our plates, alternative currencies such as bitcoin, and the Australian legal industry. These articles seek to answer intriguing questions about why these phenomena have occurred, and how they will shape the future. The interviews in this issue provide unique insights into the minds of those at the forefront of burgeoning change in the business world. Wealth management heavyweight Steve Tucker, now Chairman of Koda Capital, illustrates his career journey. Geraldine Magarey discusses the work of Chartered Accountants while Grameen Foundation Australia describes the challenges of microfinance they face in Asia. Veena Sahajwalla and Christina Chun explain their efforts to tackle the problems surrounding women in STEM industries, and Olympian Lavinia Chrystal shares her Student Story of juggling injuries and her studies in the process of tackling the alpine skiing competition in Sochi. Finally, we celebrate the achievements and opportunities of organisations including AIESEC, Chartered Accountants, and Sydney Genesis. As always, Inside Enterprise is a labour of love. It is the product of the passion of our dedicated writers, editors and executive team members, who I sincerely thank for their hard work. 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.

Marina Yang Editor-in-chief

For advertising and sponsorship opportunities, please contact editor@insideenterprise.org COPYRIGHT AND DISCLAIMER ÂŠ 2015 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 | 3

CONT E NT S R EG UL A R S New Ideas Australian Biomedical Innovation Bob Jin

Qatar: The Economy Romilla Mohan

3D Printing Alexander Orsmond

Student Story Lavinia Chrystal: From Sydney to Sochi Ricky Chan

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FEATURES Disruption in the Digital Age Challenges for the film distribution industry Anna Colless

Plant and Patent Intellectual property in the biotechnology industry

Roger Kong and Rina Yang

Commercial Law in the Australian Legal Market The players, changes, opportunities and threats

Matthew Green

Instabranding Building a personal brand on social media

Jessica Smith

The Retailer Rollercoaster Woolworths strategies and prospects

Mark Jeyaraj

IN TER EST S Digging Down: The Future of Australia's Mining Industry A look at our natural resource dependency

David Hogan

Hollywood's Superhero Supertrend Is audience fatigue beginning to set in?

Margaret Zhao

Bitcoin and the Block Chain A revolutionary digital currency

Richard Guan

The Chinese Bull is Stumbling The implications of the unforeseen devaluation Alex Noble 4 | www.insideenterprise.org

IN TERVIEWS An Interview with Geraldine Magarey Leader, policy and thought leadership at Chartered Accountants

Steve Tucker An Interview with Koda Capital Chairman

Grameen Australia Microfinance and the community loan

The STEM of the Problem Veena Sahajwalla and Christina Chun on women in STEM

Alice Wang

James Pyo and Jenny Chen

Terence Zhou

Rebecca Ching

S T U DE N T R O OM Sydney Genesis The Sydney Genesis finals pitch

MSoc UNSW Management Society

Guangyong Chuang

Nanxy Xie

AIESEC The AIESEC experience Chartered Accountants CA's Employment Evening 2016

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ON L INE For many more articles and to contribute your own, visit www.insideenterprise.org

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

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NEW Ideas

Australian Biomedical Innovation

Bob Jin

TECHNOLOGY TO PROMOTE HEALTH AND ECONOMIC PROSPERITY

iomedical technology is an increasingly well-known sector gaining traction as an integral part of the Australian economy. These home-grown inventions sell around the world, far outpacing car manufacturers and wine exports, and generate a significant fraction of Australia’s medical exports. However, the majority of the companies in this industry are not household names. Although Australia boasts seven Nobel Prize winners for medicine, it is only recently that these advancements have been commercialised, following the success of now multinational biotechnology companies, Cochlear and ResMed, which were both founded in Australia. Over 500 biomedical firms in Australia now compete globally for a slice of the US$350 billion market. Key drivers Australia and much of the developed world have an ageing population. Though 6 | www.insideenterprise.org

Australia has generally been home to a relatively young population, government projections suggest that one in four Australians will be over the age of 65 by 2040. This time bomb places exhaustive strains on public and private health systems as the demand for aged care skyrockets. Australia also faces high levels of preventable chronic diseases and health problems, such as cardiovascular disease. The solution will most definitely come in the form of commercialised medical research. As evidenced by Cochlear’s bionic ear, CSL’s cervical cancer vaccine, and ResMed’s pioneer sleep apnea devices, Australia will benefit from both an economic and health perspective by delivering medical breakthroughs to the world stage. Current industry For the next generation of biomedical innovations to succeed commercially, the industry must confront the prob-

lem of funding. The process of defining a product, finding a suitable need, and conducting extensive clinical trials and enhancements will require a regular flow of funding. Although there is a high level of funding that backs research and discovery, there is lack of funding in ‘proof of concept’ development and commercialisation. Without adequate funding for a prototype, there is little to no chance the concept will ever reach commercial stages. Government funding and intellectual capital is crucial during the proof of concept stage due to the inherently high risk and failure rates of prototypes. Fortunately, intellectual property protection can be a major incentive for innovation, allowing developers to monopolise a potential product and protect it from free riders likely to take advantage of their investment. However, it can be argued that the regimes governing intellectual property rights create a flow-on effect on the cost of

commercialisation by limiting the access to tools and technologies needed by companies to develop an innovation. In the 1980s, the bionic ear was not initially regarded as a success – in retro-

spect, it is a very real accomplishment. Similarly, the use of 3D printing for bone implants and prosthetics, bionic arms, artificial hearts, and brain chip implants, are all areas being explored by Australian

Qatar: The Economy

scientists. Soon, they will leave the realm of science fiction and become a reality that will establish the Australian biomedical industry as a global leader. ■

Geethu George

THE ECONOMY HOSTING THE 2022 FIFA WORLD CUP

hen FIFA President Sepp Blatter announced the host of the 2022 FIFA World Cup, the world turned to look at Qatar, a tiny Gulf state with a population of two million. Though other World Cup hosts, such as Brazil and South Africa, have had their fair share of scrutiny, football fans have examined Qatar even more closely due to the ongoing issue of corruption in Fédération Internationale de Football Association. Commentators painted an unflattering picture of Qatar, writing critical articles about the plight of women to documentaries about the ill treatment of migrant labor. Even Al Jazeera, a statefunded broadcaster, joined in the flurry of criticism. Despite the controversy, it is important to understand and appreciate the story behind the rise of this tiny island into an economic powerhouse. It was the Qatari economy that enabled the country’s bid for the World Cup, but it has been a decades-long journey to

reach the point where bidding was even possible: the bidding process is notoriously pricey. Prior to the discovery of oil in 1939, Qatar’s early economy depended on relentless harvesting of saltwater pearls. This sector was devastated when the Japanese created oyster farms to generate cultured pearls. The Great Depression further exacerbated Qatar’s economic struggles. However, while many countries have been blessed with natural resources, only few have developed to the same scale as Qatar. A miracle struck when oil was discovered in the huge offshore North Dome Field. It took nearly twenty years to unlock its potential. Despite an abundance of lucrative hydrocarbons, Qatar’s location, lack of infrastructure and technical expertise made it difficult to exploit the field profitably. From 1971 onwards, Qatar strove to bring in skilled labor from all over the world to build infrastructure to process and refine crude oil. In

1997, its first shipment reached Japan, a crucial step to building partnerships with international oil companies. With an increasing number of skilled workforce flowing in from developing countries like India, Qatar has also built a competitive liquefied natural gas value chain with a global reach. Towards the 1990s, Qatar decided to capitalise on the global megatrend towards cleaner fuels by converting lean gas into clean-burning gas-to-liquid (GTL) fuels. Despite uncertain commercial prospects since oil prices were low, Qatar along with Oryx built the first GTL plant in 2003, which started production in 2007. By the mid-2000s, growth in oil and gas revenues brought in newfound wealth among its citizens. Al Jazeera was established in 1996, and initially funded by the Emir of Qatar Sheikh, Hamad bin Khalifa, during its first few years. Due to Qatar’s close proximity to Iraq, the network was able to

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provide live coverage on Operation Desert Fox and also the War in Afghanistan. This brought the network to the Western world and resulted in the launch of Al Jazeera English, which reaches over 200 million households. The broadcaster has helped shed new light on the Arab world, dispel-

ling myths and offering a human face to the Middle Eastern narrative. Qatar left pearls for wealth in oil and gas. Despite being a tiny island, it has catapulted itself onto the global stage. It now has six years to prepare for the 2022 FIFA World Cup: a task that is fraught with the

3D Printing

unique challenge of being the first of the twenty-two Arab World countries to host the World Cup, the continued controversy regarding corruption allegations, and the immense pressure of unprecedented global scrutiny. â&#x2013;

Alexander Orsmond

THE POTENTIAL OF 3D PRINTING TECHNOLOGY

ince the invention of the 3D printer three decades ago, increasingly ambitious projects have been undertaken, creating larger and more complicated products for modern usage. Industry applications of 3D printing have extended to the production of parts within cars and aerial vehicles, designing apparel and assisting in housing construction. Researchers are now contemplating the possibility of printing biological structures and tissue engineering, to produce fully functioning organs to be transplanted into patients. It appears that the future of 3D printing is limited solely by human imagination. Challenge to industry The gradual development of the technology has represented a transformation of the very nature of manufacturing. 3D printing erodes barriers between producers and consumers, while allowing for increased variety and complexity in production methodologies. It has shown clear potential to undercut existing manufacturing processes and replace many of the functions carried out by the industry in its current form. While conventional methods rely on instruments uniquely designed to manufacture a particular product, 3D printers can be used to produce a variety of products, merely requiring new materials and a different code for new products. This allows adjustments to be made to the manufacturing process while minimising costs of redesigning and changing tools used in production, which enables firms to test multiple prototypes at a smaller cost. The control exerted over the placement of individual molecules enables 3D printers to produce more complex items

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than may be possible under traditional manufacturing processes, particularly pertinent for products used within aeronautical or biological industries. Similarly, this unique control over the construction of a product allows for a degree of personalisation that may create value in jewellery or fashion items. Issues The recent universalisation of the manufacturing process that 3D printing poses challenges to intellectual property law enforcement, providing a mechanism by which individuals may directly replicate the work of others. While the use of 3D printing within a traditional industry context has been successfully regulated thus far, household usage has increased. Widespread free access to a copyrighted good can undermine the exclusive right of the artist to sell their product, as demonstrated by the online

piracy situation. 3D printers can also be used for the manufacture of prohibited items. The possibility of illegal firearms being produced using 3D printing techniques has been addressed by the US Department of Homeland Security amongst other security agencies â&#x20AC;&#x201C; as illegal codes for the production of guns have become readily available over the Internet. Furthermore, medication has recently been developed using 3D printers, such as Spritam, epilepsy pills manufactured by Aprecia Pharmaceuticals. It is not unlikely that such 3D printing technology may be exploited to produce illegal pills and substances. Evidently, the ongoing refinement of 3D printing technology will bring with it complex debate about the benefits it brings to the manufacturing process, and its potential to open the floodgates to illegal activities. â&#x2013;

student story

Lavinia

Chrystal From Sydney to Sochi By Ricky Chan

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Lavinia Chrystal has always performed a delicate balancing act between her sport and her education – she is a multiple Australian National Champion who represented Australia at the Sochi Winter Olympics in 2014, while managing her studies at the University of Sydney. After making the decision to retire from alpine skiing, a sport she had picked up at the age of three, Lavinia began a new chapter in the world of business management consulting with the Masters of Management Program at the University of Sydney Business School.

t’s said that hard work beats talent when talent fails to work hard. The credo rings true in Lavinia Chrystal, whose interest in skiing was ignited by sibling rivalry. Initially, she says, she just wanted to keep up with her older brothers. Lavinia's competitiveness has persisted well beyond her childhood days on the snowy slopes. “When you’re young, you’re fearless,” she says. “Thredbo was my backyard.” Her love for speed and exhilaration was vital to her development through the years. She thrived on interschool, regional and state competitions. Eventually, she found herself at the national championships. Her success would not have been possible without her parents, who drove her down to the snow every weekend. “On Friday afternoons, we’d pack up and I’d hop into the car after school, and we’d whistle down to Thredbo where I’d ski Saturday and Sunday before jumping back on the car back to Sydney. I was very lucky.” Balancing education and sport However, balancing education and other facets of life is not an easy task, especially considering the hours of training and rehabilitation required to excel at any sport. Lavinia felt her sporting talent always seemed to be inhibited by other priorities. “I was never the best when I was young,” she says. “I was always around the top three, but I knew it was because I was doing my education on the side.” Despite this, she never considered giving up education to pursue sport. “I remember when I was about fifteen, a lot of the girls made the decision to drop 10 | www.insideenterprise.org

their education in pursuit of the sport. But my parents always stressed the importance of education and so never at one point did I consider it. I think it’s really important because in Australia, unless you’re in rugby, you don’t earn a lot as an athlete. So having education really helps, especially when injury might end your career prematurely.” And such injuries did occur. In 2010 and 2012, Lavinia battled serious knee injuries that threatened to derail her hopes of competing in the sport. At one point, she competed with a broken leg, torn ACL and torn meniscus. During this time, Lavinia went soul-searching, considering an early retirement from the sport she had loved so much since she was young. “I did nearly walk away from skiing,” she admits. By occupying herself with studies and training with the Sydney University rugby and rowing teams, Lavinia developed a sense of camaraderie unfound in individual sports during her recovery. Her passion for competition was re-ignited, and she soon found herself competing again. Lavinia's dedication to her education allowed her to graduate in 2012 from the University of Sydney Business School with a Bachelor of Economic and Social Studies. Throughout her studies, however, she had to continue working towards qualifying for the 2014 Sochi Winter Olympics. Supported by the Business

School, Lavinia was able to negotiate her studies throughout the semester while undertaking training during both the winter and summer holidays. “I’ve been really lucky. When it’s the Christmas break here in Australia, it’s the winter season in the Northern Hemisphere, and the mid-year break here is the winter season in the Southern Hemisphere.” In balancing her education with training, Lavinia knew it would not be possible to approach either of the two lightly. “You always have to stay organised. You have to work hard, set smaller goals and work towards your ultimate goals,” she says. “I couldn’t let myself rest on my laurels or get weighed down by poor performance. Fortunately I was surrounded by the right people and the Business School was very accommodating about my training.” Making her return to the alpine skiing scene six months out from the Sochi Olympics after the psychologically taxing knee injury, Lavinia was nervous but happy to be back on the slopes even though she admits that she thought she had only an “outside chance” at best. Despite this, she qualified for the Olympics and flew to Sochi to represent Australia. There, she performed admirably with a strong first run and a satisfactory second run, which left her a couple of

My parents always stressed the importance of education. Never at one point did I consider dropping out of school.

places from rubbing shoulders with the world’s best in the finals. “It was a dream come true,” she says. “It was absolutely the most amazing experience of my life to date.” While the Land Down Under remains synonymous with the Summer Olympics, Lavinia is proud of her role in raising Australia’s status at winter sports at an international level. While many opt to finish their careers at their peak, Lavinia only retired after securing another Australian National Championship. “I didn’t want to go to the Olympics and retire, because I loved the sport and I loved Thredbo,” she says. “But I knew I had to retire eventually. I’m wholly content with everything I’ve achieved.” She is now in her final year of her Master of Management, a post-graduate degree program aimed at developing finance, economics, strategy and entre-

preneurship skills. The program has been ranked by the Financial Times thrice as the top program of its kind in Australia. “It’s very practical,” Lavinia says. “There’s a real life project in most of the courses. I suppose you could say it’s a less traditional way of teaching. You still learn all the relevant theories but you learn them as you are using them in real life.” The program saw Lavinia undertake a consulting project for a small coffee roasting business in Western Sydney, which involved designing a value proposition and marketing strategy to help the owner grow his business. “The class went on a field trip to meet the entrepreneur and also some of his customers,” Lavinia describes. “At the end of the semester each group presented their very ideas to the owner and our teacher. It was a lot of fun and a very different way to learn marketing concepts.”

She also participated in the Deloitte Fastrack program, a compulsory component of the Master of Management course. The program required groups of students to design a new innovation for Deloitte or one of its clients under the mentorship of Deloitte executives and University of Sydney professors. “The best part of the program is working with a group in a high pressure situation,” Lavinia says. “Not to mention the practical element of developing an idea from start to finish – from brainstorming, research, failing ideas, prototyping, and pitching to senior level executives from Deloitte. It was challenging but I really enjoyed the creative side of it.” Having signed off on her sporting career, Lavinia is now ready to begin a new race in the field of business management consulting with her Master of Management degree. ■

The Master of Management at the University of Sydney Business School is very practical. There’s a real life project, so you learn all the relevant theories as you use them in real life.

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DISRUPTION IN THE

DIGITAL AGE Anna Colless

o single technology has disrupted feature film distribution as much as the Internet. In less than a decade, the entertainment marketplace has seen an unrivalled proliferation of digital distribution platforms such as Spotify, Amazon Books, and Netflix. They cater to the spectrum of digital entertainment genres: from online music, to eBooks, to films and television series. Because access to content is cheaper, easier and faster, it is unsurprising that over 50% of Australian Internet users view movies and television content online. Netflix reported a global membership of 62.3 million subscribers in early 2015. However, dematerialisation has had a radical impact on the economic efficacy of the traditional feature film distribution business model, creating unprecedented challenges for distributors.

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IN THE DIGITAL AGE, DISTRIBUTORS ARE BEING FORCED TO FACE THE LOSS OF REVENUE STEMMING FROM A FRAGMENTED AUDIENCE

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Piracy Ted Sarandos, the Chief Content Officer of Netflix, observed in his keynote address at the 2013 Film Independent Forum that the Internet is an “unfragmented platform” – it has no concomitant physical restrictions to prevent audiences from accessing content whenever and wherever they want. In a recent survey conducted by Screen Australia, 33% of people cited this ability to watch content at a time suitable to them as their main reason for using video on demand (VOD) services. Undeniably, ease of digital access has reshaped audience expectations of content delivery. Despite these new expectations, the traditional feature film distribution model remains unchanged, premised on value arising from scarcity. Theatre exhibitors still receive a standardised exclusivity ‘window’ over licensed content, delaying release on ancillary platforms (including VOD, subscription TV, free-to-air broadcasts and DVD) in order to drive audiences to theatres. Admittedly, the exclusivity window has shrunk in recent years from six months to 120 days. Nevertheless, this chokehold approach to feature film release creates a fundamental conflict: new, digitally-shaped audience expectations of immediate content delivery clash with a

distribution model reliant on a substantial theatrical window of exclusivity. Many point to this mismatch of expectation and supply as a prime cause of piracy, a devastating revenue drain. In the first three months of 2015, 5.2 million Australians aged twelve and over accessed online content illegally. Movies constituted almost 50% of the illegally accessed content. Pirated content is not confined to Hollywood blockbusters, with Australians also illegally accessing independent Australian films. For example, the 2014 Australian film A Little Death was the fourth most downloaded title in Australia in 2015, after the American blockbusters American Sniper, Interstellar, and Taken 3. Piracy is likely to be exacerbated by a decline in the length of cinema screen runs within the theatrical window itself. The average movie theatre screening time for smaller films (those shown on fewer than 100 screens) fell by 25% from 2005 to 2014. Films that are screened in theatres for shorter periods are nevertheless subject to the 120 day holdback, during which they cannot be accessed on ancillary platforms. This provokes impatient audiences to opt for piracy, subsequently resulting in lost revenue for filmmakers.

Audience fragmentation In the digital age, distributors are also being forced to face the loss of revenue stemming from a fragmented audience. With a multiplicity of content platforms comes the inevitable breakdown of an otherwise centralised audience. The audience is scattered across not just free-to-air and DVD rental or ownership markets, but also subscription television, catch-up television providers, and services based on subscription VOD, transactional VOD (online purchase or rental), pay-perview, and more. In 2014, more than half of those using ad-supported, subscription, and transactional VOD platforms were also using catch-up television services. In fact, 96% of VOD viewers were watching content on more than one platform. Consequently, audiences are not as easily located and can no longer be targeted as they might once have been. Even if the preferred platforms of a desired audience can be identified (which is difficult, given the scarcity of industry data), content is naturally devalued when offered to multiple licensees, due to the loss of exclusivity. A distributor must therefore choose either to lose product value, or to risk screening content on a platform that potentially reaches a mere fragment of their intended revenue-generating audience. Disintermediation The most fundamental concern for film distributors in an age of digital distribution platforms, however, is arguably neither the sluggish response of traditional business models to the challenges of piracy, nor the fragmentation of audiences that increases costs and undercuts revenue streams. Rather, it is the convenience and relatively low cost of self-distribution directly by producers, a form of disintermediation where the

distributor is removed from the value chain altogether. The Internet has provided the opportunity to deliver content directly to fans, a method of distribution that bypasses intermediary wholesalers and retailers. The benefits for content creators are twofold: they avoid hefty distributor and exhibitor fees, and they gain the opportunity to capitalise on the release of smaller budget films that might otherwise have been lost amid the abundance of Hollywood content. Rights holders are able to sell or license their content individually through services such as Vimeo, charging customers as they see fit and paying relatively low commission on gross sales to the platform operator; THE INTERNET HAS PROVIDED THE OPPORTUNITY TO DELIVER CONTENT DIRECTLY TO FANS, A METHOD OF DISTRIBUTION THAT BYPASSES INTERMEDIARY WHOLESALERS AND RETAILERS for example, 10% on Vimeo. Although unlikely to become a prime method of film distribution for major blockbusters, the potential for such services to disintermediate distributors from the value chain is cause for serious reconsideration of traditional release models. For example, the service BitTorrent Bundles, a legal doit-yourself online distribution platform, was recently used for the release of the major John Cusack and Robert De Niro thriller The Bag Man, as well as Oscarnominated documentary The Act of Killing, which was downloaded over 3.5 million times

Digital pennies The challenges faced by distributors in the digital era are significant, with piracy, audience fragmentation, and disintermediation representing just a few of the concerns that emerge as internet-based platforms proliferate. Yet the new distribution models also offer new opportunities. In the UK and the US, a higher number of vertically integrated companies, that is, those with both producer and distributor interests, allows for greater flexibility to innovate and experiment with these models. ‘Day-and-date’ releases, involving the simultaneous or near-simultaneous first release of content across all or several platforms, as well as ‘ultra-VOD’ releases, whereby content is made available on VOD services at a premium rate prior to theatrical release, signify a positive shift for the industry. The latter model was successfully employed in the release of the Australian film The Babadook. The film distribution industry is by no means on the verge of ruin. Nevertheless, it will doubtless undergo unprecedented change to stem the conversion of, in the words of CNN president Jeff Zucker, “analogue dollars for digital pennies.” ■ www.insideenterprise.org | 15

PLANT& P AT E N T INTELLECTUAL PROPERTY IN THE BIOTECHNOLOGY INDUSTRY roger kong & rina yang

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ntellectual property rights apply to the food on our plates, with patent laws pivotal to the biotechnology industry business model in the agricultural sector. In particular, seed and plant patenting has been at the centre of ongoing controversy and debate. Patenting seeds and plants is nothing new – in 19th century France, Louis Pasteur patented an improved yeast-making method for brewing beer. However, many farmers remain sceptical of whether corporations should be allowed to patent the very sustenance of life. Patents and the biotechnology industry The intellectual property protection for seeds means that the patent holder must grant permission to anyone who wishes to use the seeds. This includes harvesting and replanting the seeds from the very plants that grew from the purchased seeds. In other words, farmers can purchase seeds and use them to plant one crop only. For the next crop, they need to purchase a new batch of seeds. Intellectual property rights underpin the profits of the biotechnology industry.

The industry relies heavily on research and development to produce new innovations that are protected from imitation, so that they can be sold profitably to consumers. Companies patent the particular processes of isolating specific genetic traits in plants and then select plants for breeding based on those traits. This results in new plant varieties, selectively bred for their advantageous traits. For example, Monsanto, one of the world’s largest agricultural biotechnology companies, specialises in developing insect and weed resistance in plants so as to produce more durable and more productive crop yields. The number of biotechnology patents has exploded in recent decades. 2,000 plant patents have been granted in Europe in the last three decades, and another 7,500 applications are pending. Only a few companies dominate the commercial seed market. In 2011, 53% of the market was split between three heavyweights – Monsanto, Syngenta, and Dupont. Advances in biotechnology have increased the speed at which scientists can produce plants with desired traits, and the number of patents being

submitted by the biotechnology industry has kept pace. In Australia Under Australian intellectual property law, a standard patent for plant material can be granted if certain conditions are met. The patent protection is available if human intervention has invented plant material that is not naturally produced, and the material has not been available to the public. Additionally, the process of commercially reproducing the plant or seed must be adequately described, and the item must be for actual use at the time of invention, and not for future use. Australia's Plant Breeder's Rights Act 1994 also provides plant breeder's rights in the form of a limited commercial monopoly, and rights to exclude others from producing and reproducing the protected plant variety, and selling the plant. These rights are available to breeders of new plant varieties. Why intellectual property rights for seeds? Most biotechnology companies spend approximately 40%–50% of their revenues

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on research and development. Protecting their investments is therefore of paramount importance to them. Companies argue that intellectual property rights protect their investments by preventing farmers from reproducing harvested seeds. Without that protection, there would be little incentive for them to innovate. Companies such as Monsanto point out that the seeds are not naturally occurring – they are essentially a product of human innovation, which qualifies them for intellectual property rights just like any other creative product. Additionally, most patented seeds are hybrids or genetically modified organism (GMO) cultivars, meaning that the plant’s seeds will usually fail to produce traits identical to the parent plant, thus reducing the incentive to harvest and replant. The 2013 decision of the United States Supreme Court in Bowman v Monsanto Co illustrates this controversies surrounding intellectual property rights for seeds and the extent to which companies are willing to go to protect their intellectual property. The case involved Monsanto’s patent rights for the genetically modified Roundup Ready soybean seed, which had been available for public purchase since 1996. The Roundup Ready soybean was resistant to a particular herbicide and used by over 90% of the 275,000 soybean farms in the United States. Vernon Bowman, a farmer from Indiana, bought from his local grain elevator a mix of leftover soybean seeds, which had been sold as commodities and not as seeds for replanting. This batch contained some Roundup Ready seeds, which Bowman extracted and planted along with the remainder of earlier batches of Roundup Ready he lawfully purchased. Monsanto had rules which did not allow the use

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of their seeds without a license and prevented the reuse of their patented seeds. It filed a claim to the Court claiming patent infringement on both these grounds. In a unanimous judgment, the US Supreme Court, led by Justice Elena Kagan, held Bowman to be guilty of breaching Monsanto’s patent, as he had “devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium.” The Court’s reasoning was based on economic concerns for companies like Monsanto, suggesting that if patents were not protected from all other competition for twenty years under the Patent Act, there would be limited incentive for companies to innovate. In other words, if copies of the item were allowed, the value of the commodity would decrease to the point that companies would not actively seek to develop new varieties of seeds and advance agribusiness. Opposition to plants as intellectual property Nevertheless, opposition to intellectual property rights for seeds and plants is powerful. 2.1 million people petitioned against Monsanto patents on conventional seeds, such as cucumber and broccoli. 700,000 signed an online petition protesting Nestlé’s attempt to patent an extract from the fennel flower as an allergen cure. Protests have also been occurring ‘on the ground’, with approximately two million people participating in ‘March Against Monsanto’ in 2013 across 52 different countries, as a result of the Farmer Assurance Provision, or colloquially dubbed the ‘Monsanto Protection Act’,

being passed by the US Congress. This provision essentially prevented the courts from interfering with the trade of genetically modified seeds and plants, despite concerns that there was a lack of evidence regarding health risks to humans and the environment. One source of these concerns was the discovery of pathogens in Monsanto’s Roundup Ready soy and corn, which were suspected of causing livestock infertility and affecting plant health. Some of these demonstrations have been successful - in 2014, protests in Chile forced the withdrawal of legislation that would have permitted seeds to be patented in Chile. Many farmers argue that it is a persisting agricultural tradition to harvest, save and sow seeds produced by their plants, regardless of where they purchased the original seeds from. “If other breeders asked for our materials, we would send them a packet of seeds, and they would do the same for us,” says Irwin Goldman, one of the organisers of the Open Source Seed Initiative. “That was a wonderful way to work, and that way of working is no longer with us.” The Open Source Seed Initiative is a novel organisation attempting to revitalise the seed sharing tradition of farming. Scientists and food activists launched

the initiative in 2014, which gives seeds to farmers if they pledge to not restrict their use through intellectual property rights. The offspring produced by the open source seeds are shared with the participants. The initiative essentially operates similarly to the open source developmental model for software. It shares the seeds of lettuce, kale, peppers and quinoa, among other vegetables. “It’s to open people's minds,” says Jack Kloppenburg, one of the founders. “It’s kind of a biological meme. You might say: Free seed! Seed that can be used by anyone!” Some of the fiercest opposition to GM companies comes from indigenous populations. “Biopiracy and patenting of indigenous knowledge is a double theft because first it allows theft of creativity and innovation,” says Vandana Shiva, one of the most prominent anti-GMO activists in the world. “Secondly, the exclusive rights established by patents on stolen knowledge steal economic options of everyday survival on the basis of our indigenous biodiversity and indigenous knowledge.” The end result, says Shiva, is the development of monopolies and soaring prices on food. She also argues that ecological diversity is at risk because of the dominance of these corporations, alleging that their work results in the proliferation of monoculture GM plant varieties. “They are ruining the planet,” she says. “They are ruining this beautiful world.” The grassroots efforts have travelled vertically to concerned governments. Certainly Shiva’s home country

of India has taken a strong stance against companies like Monsanto. Under India’s Biological Diversity Act 2002, it is illegal to genetically modify endemic plants. In 2010, Environment Minister Jairam Ramesh enforced an indefinite moratorium on a GM eggplant variety, ‘Bt Brinjal’, in response to major outcry. Indian farmers protested against the commercialisation of what they saw as an endemic Indian crop, and suggested the Bt Brinjal could become a weed or cross-contaminate natural and indigenous varieties of the Brinjal plant. Nevertheless, field tests on GM plants continue in India in light of growing concerns with the question of how to feed massive population growth in a country where arable land is shrinking. Debate continues to grow It remains to be seen whether the enormous resistance against the biotechnology industry will continue to repel attempts to change legislation to allow further intellectual property protection of seeds. Europe maintains a strong regulatory opposition to GMOs, and activism in countries like Chile and Guatemala has successfully repealed national laws that limit the rights of farmers in their use of seeds. Trade agreements between countries with different approaches to the biotechnology industry only intensify the diplomatic and financial debates. It is possible that the United States, with its unique legal framework that enabled Monsanto to succeed in the Bowman case, will remain the most ideal environment for the biotechnology model to grow. ■

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commercial law in the australian legal market THE PLAYERS. THE CHANGES. THE OPPORTUNITIES. THE THREATS. By Matthew Green

The landscape of the Australian commercial legal market is changing rapidly. The Australian law firms willing to embrace the disruption will thrive, while those that hesitate will risk fragmentation or collapse. Matthew Green examines the changes that are taking place and discusses how they will shape the Australian legal industry now and into the future.

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aw firms in Australia have historically operated in an environment protected from many competitive pressures. However, competitiveness within the Australian legal market has climbed dramatically and forward-looking headlines in the financial press tell a very different story: “Lawyers face precipice in overcrowded market”; “Legal innovators stir up traditional law firms”; “Demand slump for law firms in shaky market”. There is no longer a clearly defined top tier of six heavyweight firms; the market has now been swarmed by global entrants, boutique firms, online providers, and even accounting firms. Unsurprisingly, leaders in the legal industry are acutely aware of the transformation taking place. When 34 managing partners of law firms in Australia were asked for their views on the current state of the private practice legal market, most (61.8%) answered that they saw it as being “in a state of flux”. 20.6% believed it was “under pressure from clients” and 8.8% said it was “too crowded”. When assessing the level of competition in an industry, analysts can use any number of models to distill information into logical categories. The Porter’s Five Forces model assesses the level of competition in an industry by analysing five key forces. Three of them are horizontal forces: the threat of new entrants, intensity of rivalry within the industry, and the threat of substitutes. The other two are vertical forces: the bargaining power of suppliers from above, and the bargaining power of customers from below. The simple tenet of the model is that the stronger the forces in an industry, the more competitive that industry is said to be. The following article looks at the pressures of the legal industry within the framework of the Porter's Five Forces model. For many of the incumbents in the market, the story is not a pretty one. But for some – those willing to preempt the changes rather than react to them – the decade ahead will be one of excitement, innovation and entirely new ways of doing business.

Customer power – The ultimate buyer’s market Customer power is high in the Australian legal market, and it is being driven upwards by two significant trends. The first is the growing shift of lawyers in-house, and the second is the convergence in size amongst large and mid-sized law firms. Regarding the first of the two, the last ten years in Australia has seen an unprecedented number of solicitors moving out of private practice and into the in-house teams of large corporations. In May 2013 there were over 5,000 lawyers working in-house in NSW. This comprised 19% of all solicitors in the state, compared with 13% a decade earlier. Naturally, an increased investment by corporate clients on in-house legal departments has resulted in these clients depending less upon the assistance of external lawyers for a growing number of issues. Corporate law firms are finding that clients now scrutinise external legal advice more closely than ever before, and they are demanding that their matters be dealt with more transparency and efficiency. Law firms in Australia have also been converging in size, levelling the playing field and providing clients with greater diversity of choice. The traditional ‘Big Law’ firms have been seeking to trim back expenses in a more uncertain economic environment, whereas midsize firms have taken the opportunity to carve out more dominant positions by growing their teams while continuing to offer services more cheaply. The result has been a steady leakage of partners from Big Law firms to mid-size rivals, blurring the tiers between firms and allowing specialist firms to grow through differentiation. From July 2012 to July 2015, many mid-size law firms grew their partner bases: HWL Ebsworth grew from 146 to 196 partners; Mills Oakley from 36 to 75; and Colin, Biggers & Paisley from 36 to 61. Over a similar period, many of the larger Australian firms declined in size: Allens reduced from 176 to 148 partners; Clayton Utz 198 to 178; and DLA Piper 111 to 89 partners.

As a result, corporate clients now have the power to be more discretionary in the way they select their external legal advisors. Bill Fazio is the former managing partner of mid-size firm Herbert Geer. In 2015 he explained to The Australian Financial Review that customers and businesses in the Australian legal market are “more sophisticated…they are no longer lifetime loyal customers, but rather savvy at unbundling what they go to big firms for, thinking the cost-benefit is no longer there.” For the Australian corporate law firms of the future, this means increased competition for client work, while offering their services at reduced prices and under more flexible arrangements. Threat of new entrants: Same game, new players The number of players in the Australian legal market is also increasing rapidly. Global professional services firms such as PwC and KPMG have been making a lot of noise in recent years about their desire to re-enter the Australian legal market, and managing partners at many of the traditional law firms are now seriously considering the threat that this might pose to their competitiveness. In 2014, PwC took on Tony O’Malley and Tim Blue – both former King & Wood Mallesons managing partners – to run PwC’s legal practice, and in 2015 recruited Murray Deakin, a former national practice group leader at K&L Gates. EY’s head of legal services, Howard Adams, told The Australian Financial Review that “the time is right for accounting firms to re-enter the legal market” and that the move is predominantly “client driven”. From the client perspective, these firms have a unique ability to compete with the traditional Big Law firms: they can offer convenience and flexibility in a “onestop shop” by transferring work across various arms of their multi-disciplinary practices, including accounting, consulting and tax. Alongside the emerging threat of the big accounting firms, the Melbourne Law School 2015 Australia: State of the

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Legal Market report lists the flurry of start-ups by ‘New Law’ firms in Australia in the last five years, including some better known names like LegalVision, Hive Legal, Keypoint Law and Marque Lawyers. Anecdotal feedback suggests that many of these New Law firms are enjoying double-digit growth. AdventBalance, one of the first of these alternative firms to kick off in Australia, has grown rapidly since 2008. It is now the largest alternative legal services provider in the Asia-Pacific region, with over 170 freelance lawyers in its network. AdventBalance operates by sending lawyers on secondments to clients for three to six months on average, and it now also offers on-call services for its clients. This allows it – and other New Law firms like it – to charge substantially less than what a traditional law firm would charge for the same work. This model draws an increasing number of large corporate clients away from traditional law firms, a trend which will only continue to grow over the next decade. Threat of substitutes: Same game, different rules The next question to ask is how much of what lawyers actually do can only be done by a certified legal professional? In today’s rapidly changing environment for the delivery of professional services, it has become quite apparent that the answer is different to what it once was. Legal Process Outsourcing (LPO) comes to mind as one of the primary ways in which certain legal functions are being substituted. LPO refers to the act of a law firm outsourcing legal support services to a small external law firm or services provider, usually because it is cheaper and faster to do so. The work that is outsourced will be routine and time-intensive in nature, allowing LPO providers to take advantage of technology, cheaper labour, and economies of scale to perform this work faster and more affordably than traditional law firms. This bread and butter work would otherwise generate a large portion of the revenue in a legal matter run by a firm, through partners charging out teams of junior lawyers at $200 to $300 an hour for dozens of hours of work. As empowered

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corporate clients increasingly demand for this type of work to be outsourced to low-cost LPO providers, however, law firms will continue to cede large chunks of revenue-generating work to alternative providers. New legal software and technology will also begin to truly make a mark in coming years. Mark Lemley, a professor at Stanford Law School, bluntly describes the legal industry as “horribly inefficient”. In addition to his position at Stanford, Lemley is the co-founder of legal analytics company Lex Machina. Lex Machina is one of the forerunners of the emerging legal analytics field that will completely revolutionise the practice of law around the world. In this field, companies such as his mine legal data to reveal insights

ANINCREASINGNUMBEROF LARGECORPORATECLIENTS AREBEINGDRAWNAWAYFROM TRADITIONALLAWFIRMS, ATRENDWHICHWILLONLY CONTINUE TO GROW about judges, lawyers, parties and cases to discover and communicate meaningful patterns to purchasers of its services. In a similar fashion, artificially intelligent computer systems such as IBM’s Watson can be utilised to answer questions posed in natural language by reviewing hundreds of millions of sources of information to observe, interpret, evaluate and decide upon an answer in seconds. For example, when a company’s board is weighing up the costs and benefits of taking legal action, legal analytics providers can be engaged to use algorithms and data-driven searches to review thousands of previous cases to determine the likelihood of success, the expected cost of taking action, and the best legal arguments to adopt. Answering these types of tricky legal questions has historically been the exclusive domain of commercial litigation lawyers, but now at least some of that work appears to be threatened by the advent of legal

analytics services that are cheaper, faster and arguably more accurate. Lex Machina currently focuses specifically on quantitative legal prediction in IP litigation and IBM’s Watson still has some way to go before it truly enters the professional services arena. Nonetheless, legal analytics providers in the near future will affect virtually every practice area in commercial law, and law firms will be required to acknowledge the power of this technology and work with it if they intend to thrive. Internal rivalry: Managing the change and adapting to survive Underlying all of these forces is the central and most important force – the internal rivalry between current players in the market. It is impossible to cover all of the strategies that law firms are employing in order to adapt, but two major categories are particularly interesting: diversification and hedge strategies, and alternative fee arrangements. Almost in anticipation of the major disruption taking place from all sides, heavyweight domestic law firm Minter Ellison made a bold move in 2015 to differentiate itself from its contemporaries by dropping the word ‘lawyers’ from its branding as it seeks to adapt to market changes. Under its new label, the firm intends to offer a broader spectrum of professional services, including non-legal services such as project management and consulting, in a bid to win corporate clients who demand that their legal advisers have a better understanding of the business issues facing the market. Interestingly, Chief Executive Tony Harrington, who is leading this new approach at Minters, is himself a former global managing partner of PwC – the global accounting behemoth heading in the opposite direction by entering the market for legal services. Pursuing innovation has also been a key focus for law firms attempting to differentiate themselves and compete for clients who are demanding more flexibility and originality. In 2015, Australian independent corporate law firm Gilbert + Tobin retained its title as Australia’s Most Innovative Law Firm in the Financial Times Asia-Pacific Innovative Lawyers Awards and was

one of the winners in the 2015 Legal Innovation Index, judged by renowned professional services strategist Dr George Beaton. These rankings were based upon Gilbert + Tobin’s commitment to novel and commercially aware advice provided to clients in complex matters and its adoption of disruptive technologies for client engagement. More recently, Gilbert + Tobin has invested in NewLaw firm LegalVision, which is also Australia’s fastest growing law firm. Gilbert + Tobin’s aim behind this move is to collaborate with a disruptor in the market in order to take advantage of technology and new processes to deliver advice to clients more quickly and efficiently. Large Australian law firm Allens is developing its own hedge strategy with its offshoot practice Allens Accelerate, which is focused on the Australian start-up community. Also a winner in the 2015 Legal Innovation Index, the Allens Accelerate program is dedicated to providing reduced price legal guidance and advice to fledgling companies and start-ups in a bid to form early relationships with Australian clients that have the potential to become the next Atlassian, Freelancer or Xero. In October 2015, global firm Herbert Smith Freehills (HSF) trialled a ‘pop-up’ legal support office in Perth providing legal services to rival those of cheaper LPO providers. HSF is well known for this type of ‘insourcing’ of legal work. In 2011 it launched an office in Belfast,

to be used as a hub for its vast global operations in reviewing and analysing huge volumes of documents in a process driven way, for a fraction of the price charged in major global offices like London or Sydney. In this way, HSF is more capable of competing with the threat of emerging LPO entrants while keeping clients satisfied that highly confidential material is being kept within the walls of the firm. In terms of competing on price and alternative price arrangements, client discontent with traditional legal ‘time-based’ fee structures is not new. However, the shifting landscape in the legal market has provided wellresourced clients with both the power and the impetus to demand change. A 2012 report conducted by ALM Legal Intelligence and sponsored by LexisNexis confirmed that, in the wake of the economic collapse of 2008 to 2010, US corporations sought Alternative Fee Arrangements (AFAs) – such as fixedfees or value-based fees – from their law firms with renewed urgency. A more recent 2015 Australian report found that in-house counsel are generally still dissatisfied with the lack of willingness and innovation in Australian law firms’ alternative billing arrangements, especially as clients face continuing budget pressures that demand more cost efficiency from law firms. Indeed, the report showed that in-house spending on external legal advice has decreased by 25% since 2012. One of the first major fixed-fee arrangements in Australia came in November 2009 when Telstra and Gilbert + Tobin came to an agreement whereby Telstra would pay a fixed fee and receive as much legal advice as was needed over a four-year period, subject to certain conditions. Other large law firms have certainly considered AFAs with

increasing seriousness in the years since, however client discontent suggests there is still a long way to go. Firms such as Marque Lawyers, which was established in 2008, have been able to successfully differentiate in the market by genuinely committing to AFAs over time-based billing. This price differentiation strategy forms the centrepiece of Marque’s strategic positioning in the legal market, and has been instrumental in the firm’s rapid revenue growth in recent years, which surpassed 12% in 2014, the eighth highest result amongst Australian law firms. Where to from here? It is clear that Australian businesses will no longer tolerate mediocrity from commercial law firms. Clients are more capable and more knowledgeable due to the growth of in-house legal teams, and have the luxury of choice as a result of new entrants and substitute services. As Dr George Beaton puts it, “the golden age has ended, the good old days are gone,” and the power is now clearly in the hands of the buyer. Commercial law firms, trapped in the centre of this zerosum game, must innovate and take risks in order to thrive, although this is clearly easier said than done. Nonetheless, as rapid advances in technology continue to disrupt professional services, some encouraging signs have started to emerge. Many commercial firms have embraced the shift in power with their clients, have acknowledged and reacted to new market entrants, and have begun to pursue alternative strategies to compete with substitute services. These will be the characteristics that define the winners of the future, and it will be with great interest that we wait to see it all unfold. ■ Matthew Green is a paralegal at Gilbert + Tobin.

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INSTABRANDING BY JESSICA SMITH

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"COMPANIES NOW SEEK TO CAPITALISE UPON THE INSTANT AND INTIMATE CONNECTION PROVIDED BY SOCIAL MEDIA PLATFORMS"

ocial media has rapidly infiltrated every aspect of our lives, enabling us to share and connect. Intimacy is delivered through the immediacy of social media networks. In this context, the opinions of popular bloggers and other social media ‘celebrities’ have unsurprisingly gained salience. In some cases, endorsements from social media personalities are even more credible than endorsements from celebrities, scientists or experts – for better or for worse. Corporate use of Instagram Companies now realise the benefits of maintaining a strong social media presence, and seek to capitalise upon the connection provided by social media platforms. Companies can utilise social media at various stages of the marketing process – to understand the needs of their customers, to advertise new products, to foster consumer engagement with the brand, and to gather valuable feedback. Recently, the picture editing and sharing app Instagram introduced a variety of updates to its platform that enhance both user experience and functional potential for advertisers. Users can post short videos with sound, as well as images in landscape and portrait orientation rather than the typical square format. Facebook, which bought the app for $1 billion in 2012, hopes that these enhancements to the Instagram service will attract more advertising revenue. It predicts revenue should reach $2.8 billion by 2017. Advertisers have certainly embraced the new

format – for example, promotional footage from the latest Star Wars film was released exclusively as a landscape Instagram video. Building a personal brand and portfolio While social media advertisements have always been accessible for larger businesses, Instagram has now improved accessibility for smaller businesses, and even individuals trying to build a brand, such as bloggers and ‘professional Instagrammers’. The development and maintenance of a personal brand is no longer optional today, with many employers now evaluating a potential employee’s social media presence for a broader picture of the candidate. Laura Currie is a recent Bachelor of Arts graduate of the University of Sydney who majored in Digital Cultures. She has run the @coffee_sydney Instagram account since early 2015. Coffee Sydney was the result of her job search crossing wires with her love for coffee – in the midst of applying for graduate positions and internships, she started the account to share images of places to drink coffee in Sydney as part of her online portfolio. “I’ve always had an interest in the digital world since my early teenage years, and specifically social media,” Laura says. “I saw this as an opportunity to show others that I can generate and share interesting content online and engage a large audience, as I wish to pursue a career in social media.” What started off as a hobby has grown

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into something much bigger, with Coffee Sydney currently boasting over 10,000 followers. Laura has also diversified the brand, introducing an accompanying blog where she reviews cafés, coffee and other related products and events. While Laura did not originally create Coffee Sydney with the intention of it reflecting her personal brand, the account has now become an extension of it as a portfolio of her skills in social media. She ensures that the image and message of Coffee Sydney is cohesive across all the platforms she utilises – from the voice she adopts for her descriptions, her account name, and her posting strategy. The Coffee Sydney brand has certainly bolstered Laura’s attractiveness as a job candidate, giving her a strong understanding of how to reach out to large audiences, how to use photographs, and how advertising companies are changing their marketing strategies. The skills she developed in establishing and nurturing its growth impressed interviewers for a social media internship at the Sydney Opera House. “I discovered the opportunity through LinkedIn. I applied directly through the site and was sent an email regarding the internship.” She outshone 149 other applicants to gain the position, with Coffee Sydney standing as testament to her understanding of using social media to communicate with target consumers. Brand collaborations Predominately, small companies will send samples of their products to Instagram

personalities, or “influencers”, in the hope that they share it in an image. Alternatively, there are large companies that will send free products to the influencer, upon agreement to post about it. Finally, companies and influencers may enter a contracted agreement. The company or brand will stipulate how frequently posts should occur, in exchange for payment per post or a steady supply of the product. Notably, the following that Laura has accumulated has attracted a number of larger brands to collaborate with the account. “I have been privileged enough to receive free reusable coffee cups, coffee bean samples and other promotional material, even free personalised clutches from The Daily Edited.” In return for their generosity, and given that they align with the Coffee Sydney brand, Laura often promotes the brands by incorporating the promotional material in her blog and Instagram posts. Julie Tran of @juliee_tee, a vegetarian food and lifestyle account now boasting close to 24,000 followers, fell into Instagram much the same way as Laura. A recent Bachelor of Oral Health graduate, Julie began her Instagram account with daily posts of what she was up to and what she was eating. “I noticed that my healthy food posts were getting a lot more attention than I anticipated,” Julie says. “As I started to develop and establish a theme and unique aesthetic, I began to gain more followers.” Her consistency and style, not dissimilar to a corporate

"COMMERCIAL USE OF SOCIAL MEDIA ADVERTISING HAS BEEN WIDELY CRITICISED FOR ITS LACK OF TRANSPARENCY"

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brand coordinating its marketing communications and creating a logo, attracted more than followers – they also drew advertisers. Soon, small businesses and advertising agencies representing larger brands were reaching out to propose collaborations. Taylah Nilsson (@taylahnilsson) is a photographer with over 44,000 people following her on Instagram for photographs of Sydney’s Northern Beaches, Taylah’s travels, and her daily life. Taylah completed a diploma in Digital Photography before undertaking her Bachelor of Arts (Marketing) at Macquarie University. Like Julie, Taylah has received numerous collaborative opportunities with brands and companies through Instagram. For Taylah, they range from products in exchange for a photo posted online, visits to restaurants and hotels, and even an allexpenses-paid trip to Europe. “The more followers you gain, the bigger the brands you can connect with and the more you earn,” Taylah says. “I’ve definitely noticed a difference in this between 24,000 and 45,000 followers.” Transparency However, commercial use of social media advertising has been widely criticised for its lack of transparency. Fans can turn quickly against a social media influencer amidst accusations of being misled when blogger endorsements do not explicitly state that posts or opinions have been paid for or are sponsored. While Laura does predict some public backlash, she also sees the benefit for businesses in targeting specific audiences and generating sales through call to action buttons that redirect consumers from Instagram to the business’ online store or website. “I already see Instagram ads appear every now and then on my feed, but they appear irregularly and are not taking over entirely. They’re not invasive to me.” Similarly, Julie strongly believes in maintaining her brand and Instagram account’s integrity. “I tend to steer clear of larger companies and brands who request that you agree to share their product in

return for free products,” she says. “It just removes the integrity from your page when you are blindly advertising products you don’t truly believe in.” Regarding the transparency of paid endorsements on Instagram, Julie stresses that it does vary from account to account. “Most account holders will make it quite obvious, with the brand’s product and page tagged and clearly discussed in the caption. However, there is definitely a grey area when it comes to Instagram endorsements, especially with high profile accounts that are paid fairly significant amounts of money for product placement.” While Laura and Julie are aware, and somewhat critical, of the less ethical side of paid social media endorsements, Taylah views the practice in an immensely positive light. “I think it’s brilliant, especially for businesses. They pay very little to multiple social media influencers in order to get word of mouth and publicity surrounding their product and brand.” Certainly brands can build loyal relationships with influencers for very little – while the average sponsored post costs $384, 72% of influencers will share additional posts outside of those contractually obliged for free. They are incentivised to do so because it maintains their own credibility and the appearance of authenticity. Instagramming as a day job For some influencers, Instagram is integral for their career. Taylah, as a photographer, relies on the inherently visual sharing capability of Instagram to share her work. Laura’s professional social media career has been launched not only by her studies but by the evidence of her skills and experience in a well-received public personal brand encapsulated by her Instagram. In a sense, it is a part-time job – but one that feels like a hobby. As Julie puts it, “My Instagram has never felt like work and I don’t think it ever could. It has always been a very special creative outlet for me. I do feel a need to be consistent and frequent in my posting but this mindset has always been something very positive, and almost habitual. It encourages me to keep creating.” ■

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A Retailer Rollercoaster

Mark Jeyaraj

The notion that Woolworths would lose almost a dozen of their senior management team, including the chief executive and chairman, within the space of a few months would have been absurd a year ago. So where and how did the retail giant stumble and fall so quickly? Moreover, what can it do to recover its investor and customer sentiment – and can the recent Rewards scheme help win the battle?

oolworths once had one of the highest earnings before interest and tax (EBIT) margins in the world, peaking in 2008 at 8%. Its core food and liquor business was – and still – remains 37% larger than Coles. However, prioritising profitability over share price and customer satisfaction means the company has ended up falling short of its ambitious plans. It has instead given oxygen to its rivals Westfarmers, Aldi and Costco in a surprisingly short amount of time. This has resulted in a share price drop over the past year of about 17%, with net profit after tax dropping by 12.5% to $2.1 billion. To add to the fire, analysts warn that the share price may fall even further, given the uncertainty of earnings as Woolworths pays the price for mismanaging the competitive landscape of the $85 billion supermarket sector.

Rebuilding the fort The story starts from the supermarkets itself. After a drop in sales and adverse feedback on rising prices, poor customer service and stock availability, the former Managing Director and Chief Executive Officer, Grant O’Brien, decided to take a stand. In an aspiring three-year growth strategy based on a new ‘Lean Retail’ operating model, Woolworths aimed to deliver more than $500 million of cost reduction across fiscal year 2015-2016, of which $200 million would be aimed at lowering prices. However as Bruce Smith of Alphinity Investment Management notes, while these numbers sound impressive, “Woolworths needed to do much more,” given the company’s yearly sales of $60 billion. Did Woolworths really need to invest more in lowering prices? Though ‘back-basket’ products were indexed

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"THE WOOLWORTHS REWARDS PROGRAM PRESENTS A SIGNIFICANT GAMBLE FOR THE RETAILER" at 100 points more expensive than rival Coles on average, everyday groceries actually turned out to be cheaper in Woolworths. However, they needed to convince shoppers that they were the price leader, so the company diverted $400 million of capital expenditure towards supermarkets from its other businesses. One consequence of this was a new venture called Woolworths Media Hub. It was launched to provide a low cost in-house media alternative in response to encourage a better relationship with suppliers and to address shrinking profitability. Another outcome was customer service improvements, which included simple strategies like clean trolleys, welcoming customers, errorless pricing, no stock outages, fresher fruit and vegetables and shorter checkout queues. It is a given fact that Woolworths is a retail giant, so naturally it has high fixed costs. Nevertheless, this implies that directing millions of dollars to lowering prices was an ironic move, because it made it even harder to reach sales figures high enough to ensure healthy new investment. Same store sales have fallen 0.9% in the last two quarters, stipulating the first negative result in the past twelve years. In the end, Standard & Poor’s lowered its outlook for Woolworth’s shares from stable (A-) to negative (BBB+). Threatening opponents The shift in marketing tactics towards the ‘Cheap Cheap’ campaign to launch products like the $0.85 Homebrand bread against Coles’ ‘Down Down’ offensive failed to gain the traction they had hoped. The importance of price and perception has long been seen with Woolworths partnering up with celebrity chef Jamie Oliver to combat Coles veteran

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Curtis Stone. However, responsive battling against Coles’ house brands and lagging behind their store refurbishments only added to customer belief that Woolworths was no longer the market leader. Outside the duopolistic market, hard discount retailer ALDI plans to ramp up its presence, with forty stores in South Australia and Western Australia and another forty in the eastern states of Australia. More ALDI stores will put pressure on the profit margins of Woolworths, with the ALDI presence expected to drive the IGA chain out of third place. Meanwhile, Germany’s global discount supermarket chain, Lidl, has reportedly looked into opening in Australia in the next few years to directly compete with Aldi. David Jones is also expected to increase competition, at least marginally, at the higher end of the socio-economic spectrum by targeting high-income consumers. Directing its sales at those who are less price-sensitive, the departmental store is looking to overhaul its food halls and eventually open independent food stores. As such, Woolworths is being steadily undermined and destabilised not only by the rehabilitation of Coles, but also by other competitors in the market. Gambling on rewards The recently introduced overhauled Woolworths Rewards program presents a significant gamble for the retailer as it cut out the middle man, Qantas Frequent Flyer (QFF), in a bid to increase customer loyalty through ‘instant gratification’. Indeed, shifting from a points-based system to credit-based system is revolutionary in the saturated retail industry. It signals that the brand is listening to its customers after market research revealed

that cash discounts were preferred to points. Analysis by Canstar Blue has found that the average shopper would take over seven weeks on the Rewards program to earn $10 in credit, assuming they spent $108 per week – less than half the time it would take to earn an equivalent reward from Flybuys. Nonetheless, there are several risks to the new program. Firstly, the scheme targets specific products only in Woolworths and BWS, unlike the Flybuys system, which rewards every dollar spent at a vast array of subsidiaries. Additionally, according to Deutsche Bank analyst Michael Simotas, the new loyalty offer will cost Woolworths around $500 million a year compared to the $80 million spent on the QFF component of the old Everyday Rewards program. Finally, the addition of the new colour-coded promotion may clash with red ‘Low Prices Always’ and yellow short-term promotions, which may confuse shoppers, in contrast with Coles’ relatively simple in-store value messaging. As the program is tried and tested, only time will tell if customers appreciate the more direct scheme. The master plan Woolworths Limited spans a whole array of brands in hospitality, financial services, homewares, food and liquor. However, its big-box home improvement retailer, Masters, has been called a ‘distraction’ from Woolworths’ main business direction. Ralph Waters, chairman of the retailer, directly told shareholders that the board disagreed with the market’s conclusion that the Masters strategy was poor. As a result, $90 million was poured into a loss-making joint venture with US-based Lowes. Woolworths also revealed that the losses of the home improvement chain

increased by 33% to $224.7 million between the second and third quarters of 2015. Despite revenues rising 22% in 2015, the cost of sales and administration also rose 46%, leading to an overall loss of $604 million ever since the stores landed in 2011. So what caused the malfunction of the ‘big-box’ chain? Firstly, its rapid expansion in the establishing year and even today with plans to role out 150 more stores from its current 53, means that Masters has been forced to choose inferior locations, including some rejected by Bunnings due to its cost or location. Indeed, Mike Tyson, Director of Home Improvement, admitted that such a move “cannibalised [Masters].” Its ambitious plans to shake up the competitive whitegoods sector resulted in the disregard of the high-margin basic hardware sector, which exacerbated the decline in revenue. Going forward, its ties with Lowes mean that the stock will be out of season in Australia. Lastly, shopper experience and employee culture lagged behind the activities, workshops and expertise of rival Bunnings because of Woolworths’

top-down culture. ‘Masters 2.0’ has been launched to address these shortcomings, but a positive outlook is dubious. Despite its aim to change the layout of stores, it has not taken on the recommendations to redirect towards home decoration and lifestyle to properly achieve the sales growth it so desperately needs. If Woolworths aims to keep the brand in the portfolio, it is still not expected to see positive returns until at least 2020, a time frame too long for many investors to justify. Add Big W to the mix. While the store was aimed to be “the number one choice for Australian families in general merchandise” in early 2015, its earnings have continued to fall, from $200 million in 2010 to $130 million in 2015. So the question is: will Big W or Masters end up as the next Dick Smith? Dick Smith may not have had the right strategy to compete with JB HI-FI and ended up being sold to Anchorage Capital in 2010 for $94 million, only to be floated 18 months later at over 3.5 times the buying price.

Boardroom blitz Woolworths has accompanied its new strategies with the announcement of a three-year growth strategy that saw 1,200 jobs cut and $500 million reinvested into the company. These job cuts included much of the executive board. All the same, though these upper level departures in the second half of 2015 have stimulated uncertainty, they reflect the level of change needed to regain market trust and implement decisions that the group needs. Indeed, the new managing director, Brad Banducci, should bring a fresh perspective to the board, with his aim of structurally changing the face of Woolworths. At the end of the day, Woolworths operates more than a thousand supermarkets across Australia and New Zealand. It has the strongest national liquor business and one of the best supply chains nationally, giving it a sustainable competitive advantage over Coles. Its latest decisions will nevertheless determine whether it will have to settle for second best. ■

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David Hogan

Digging down: The future of Australian mining A look at our natural resource dependency

onsistently decreasing iron ore prices have led many to speculate that the Australian mining sector is failing, and that the boom is no more. Iron ore prices have hit points as low as US$55.73 a tonne in August 2015, significantly down from the generally consistent US$180 a tonne prices of 2011 and 2012. While Fortesque Metal’s Andrew Forrest daringly suggests that giants BHP Billiton and Rio Tinto are employing the strategy of “oversupplying the market, (and) driving down the iron ore price” to make smaller firms non-competitive, it remains clear that there have been fluctuations that have affected the sector’s perceived long-term stability. Regardless of whether the boom is ending, the situation poses several crucial questions which must be dealt with by both the Government and businesses. How is Australia meant to safeguard future economic growth? To what extent should Australia seek to diversify its income streams? A recent history The boom is widely seen as having started in 2002, coinciding with a time where we received increased prices for our exports and paid relatively lower prices for our imports. Many economists attribute Australia’s 24 years of consecutive economic growth in part to the stimulus from the

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mining boom, with the massive revenue from exports and foreign direct investment. Much of this demand was facilitated by demand from a growing China looking to facilitate its infrastructure boom. The RBA elaborates that by 2013, the boom had increased household income by 13%, raised real wages by 6% and lowered unemployment by 1.25%, illustrating some of the benefits from this economic ‘shock’. The sector continued to swell on the back of strong demand and strategic supply until around 2012, when sharp declines began to occur due to the formal introduction of the Minerals Resource Rent Tax as a 30% levy on the profits higher than $75 million earned by mining companies in Australia. The tax was part of a wider tax review process known as the Henry tax review, designed to raise additional revenue to spend on infrastructure projects. The Abbott Government later repealed it in 2014, and neither it nor the Turnbull Government has attempted to implement a similar scheme. Current issues The glaring issue remains the falling iron ore prices and the long-term viability of the sector, combined with calls for Australia to become less dependent economically on mining. Many of the sector’s current trepidations are based on the premise of

China’s demand slowing down as the Chinese infrastructure boom dwindles. Given its sizeable dependence on the sector, the Australian economy may be significantly at risk as a result of such fluctuations. This prospect prompts a need to reduce risk by investing in other sectors to reduce overdependence, which is a major issue for the Australian government to tackle. Environmentalism also poses a major obstacle to the sector in that there is a more pressing need for firms to remain profitable while also abiding by environmental standards. The Australian Government, like many others around the world, is increasingly under pressure from lobby groups to ensure that mining firms actively employ measures to reduce their environmental footprint. Considering the recent societal push towards investing more in renewable energies, the non-renewable energy sectors will need to adapt by enhancing their efficiency and competitive production methods. This will ultimately come down to finding ways to increase profit margins by minimising costs such as those of mineral extraction and machinery purchases. Such a process may require firms to conduct an in-depth assessment of current business models and procedures in order to highlight potential areas for improvement, while also actively looking to utilise innovative and cost-effective

technological advancements. Where to from here? Ultimately Australia should look to diversify its revenue streams by investing in innovative sectors, such as renewable energy technologies, so as to minimise the economic impact of fluctuations from the Australian dollar and demand for our resources. Despite this, it is still imperative that mining remains one of the forerunner sectors of Australia’s future economic plans, given that it currently – and historically – has contributed significantly to Australian growth and jobs, and has the potential to continue expanding. The sector has also been a great source of foreign investment, particularly from China, which is economically stimulating and contributes to the roughly 2.2% of Australians involved in mining-related employment. Future governments should look to encourage a continuation of this trend by providing incentives and favourable conditions for multinational firms to operate in Australia, which would both inject funds into the economy and provide more employment prospects for locals.

A 2015 EY analysis of the mining sector’s response to slowing growth concluded that “pro-cyclical, short-term behaviour currently prevails, with the collective industry mindset focused on consolidation and capital returns in a low-growth environment.” While this approach makes sense from a business perspective, there needs to be more emphasis from firms in regards to long-term strategy, namely investment in innovative technological methods of mineral extraction. It also remains unclear whether a tax or government measure similar to the Resource Super Profit Tax will be implemented in the future. The Minerals Council of Australia has speculated that the Turnbull Government may look to introduce economic and productivity reforms to increase the viability of the sector. Finally, it has also been suggested that the process of mining is becoming increasingly mechanised, with business futurist Morris Miselowski speculating that in approximately twenty to fifty years, many human roles in mining, such as physical digging and on-site labour, will be carried out by machines. For example, with

artificial intelligence capabilities gradually increasing we can expect driverless trucks to eventually phase out the human role in the mining process. Rio Tinto has already operated driverless trucks across sites in the Pilbara, a major mining region in Western Australia. As technology becomes more efficient and cost-effective, there is every chance that similarly innovative machines will be introduced to the sector on a large-scale. It is likely smaller firms will follow Rio Tinto when technological advancements allow for such machines to be produced at lower and more reasonable prices. These opportunities and threats ultimately characterise the future of Australian mining as one of change and uncertainty. However, the industry has been through it all before: the 1960s and 1970s saw the industry’s dominance in the Australian economy challenged by manufacturing, an unstable global economy, conditions, and regulatory changes. Yet the mining sector was able to dig itself out of the hole, and it is currently strong enough after the boom to continue to weather its challenges. ■

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Margaret Zhao

Hollywood's superhero supertrend As film studios opt to produce more blockbuster franchises, is audience fatigue beginning to set in?

n the past decade, audiences have seen big studios trend towards tent-pole filmmaking – where a blockbuster is expected to perform superlatively in order to support the studio’s overall portfolio. The trend is characterised by an onslaught of remakes and book-to-film adaptations. Some critics claim that audience fatigue and a thirst for original screenplays are responsible for the gradual decline of the theatrical platform’s commercial viability. Nevertheless, a closer look at the entertainment industry shows that tent-pole blockbusters are a logical development and that they are here to stay. Tent-pole strategy The reality is that the Golden Age of cinema is over. The Internet and ease of accessibility to entertainment is undermining the cinematic platform. It is becoming harder and harder to make a profit out of ticket admission sales. The disastrous 2013 summer box office represented a collective loss of 17% out of the nearly $4.5 billion spent by studios overall. In those four months, only four big studio releases made a gross profit: Iron Man 3, Fast & Furious 6, Despicable Me 2 and Monsters University – all next-chapters to their original films. Audiences are no longer willing to pay a premium to see films at the cinema when they have free reign in the comfort of their own homes to decide which movies and television shows to watch on sites such as Netflix. This means that gargantuan efforts have been made to boost the market34 | www.insideenterprise.org

ing of new blockbusters, which invariably increases a film’s budget. Over the period of 2003 to 2013, the average cost per film by the Big Six Studios – Warner Bros, Disney, Universal, Columbia, 20th Century Fox and Paramount – increased by 75%, whereas the number of films produced decreased by 32%. There is a clear trend: as studios increase their budgets on production and marketing, the number of films that they release plummets. Recent performance at the box office and the 2013 summer fiasco seems to suggest that this tent-pole strategy is responsible for growing losses every year. Yet the Big Six Studios continue to invest more and more per film and insist upon increasing the frequency of blockbusterFOR EVERY SUPERHERO RELEASE, THE AVERAGE FILMGOER'S EXCITEMENT FADES A SHADE CLOSER TO TEDIUM budget films each season. Statistically, audiences have never supported more than nine blockbusters in a summer, of which, on average, only half make a profit. Given the massive budgets allocated to these films, they will either make or break the studio’s performance for that year. With the knowledge that these films are unlikely to break-even or bring long-term market returns, why do studio executives still insist upon making blockbusters? Market analysts like Liam Boluk theorise

that it is because the film industry is evolving. The business is no longer about ticket admission sales alone, and underperforming at the box office is now commonplace. Instead, revenue from ancillary products must be factored in to provide a more complete depiction of a film’s success. In 2012, ticket sales only accounted for 52% of the average film’s revenue. The rest comprised home video sales, pay-per-view, merchandising and licensing and syndication fees. The new goal is to recoup costs through secondary avenues, rather than to reap profits at the very onset. This makes sense when you consider the changing technological environment – audiences now have more variety and choices in the way they consume their media and filmmakers realise that the theatrical platform alone has become insufficient. The success of a film’s release is no longer measured by its theatrical performance, but rather by its ability to draw an audience upon which a multimedia platform experience can be built. Through this lens the massive budget allocated to production and marketing is justifiable, because it captures the latent interest and viewership of an audience who will go on to rent the film, buy film merchandise and play video games based on the film. Superhero obsession So how does this relate to Hollywood’s obsession with superhero franchises? The tent-pole strategy rests upon finding the

right intellectual property to form the foundations for an empire. Banking on tested material and capitalising upon an existing fanbase ensures maximum return from one narrative. Therefore, the benefits of investing in marketing and promotion for a studio’s portfolio centrepiece extend to securing an audience for the next instalment of their franchise. Such a project may be spread out over the span of a decade, as seen in The Lord of the Rings and the Fast and Furious series. Looking at the revenue of recent blockbuster franchises, it is evident that superhero fever has swept boardroom culture across every big studio. The Marvel Cinematic Universe leads the superhero fanfare, being the first franchise in history to gross over $9 billion at the global box office. Film schedules for the rest of the decade show up to seven superhero genre blockbuster films per year fighting for box office attention within shorter and shorter time frames. For the average viewer, 2016 will be saturated with superhero film releases and film critics hypothesise it will either make or break the superhero genre. Currently there are thirty DC and Marvel films set to be released from 2015 to 2020, introducing a cast of titular characters relatively unknown to the general public, including Cyborg, Dr Strange, Gambit and Shazam.

Also, in addition to Warner Bros' muchanticipated Justice League counterattack, Fox and Sony have independently launched strategies to penetrate the market with the Marvel film licenses they have managed to retain. The fear of audience fatigue is a very real concern. Growing audience fatigue Fox’s Fantastic Four reboot of the franchise might just represent the beginning of widespread audience disillusionment with the superhero genre. The film grossed $56 million in North America on a budget of $120 million, and gathered largely scathing reviews. One questions the judgement of Fox executives for announcing a 2017 sequel. If Boluk’s theory holds, it is possible that recuperating the losses from theatrical underperformance will be incredibly difficult, even with the support of ancillary revenue, when the Big Studios flood multimedia platforms with their own renditions of what Marvel has already achieved with its cinematic and now televised universe. Many would say the corporate obsession with launching a superhero franchise is becoming ridiculous and that it is a key factor in the gradual decline of the film industry. For every release of the next big superhero adaptation, the average filmgoer’s excitement fades a shade closer to tedium. The stakes have mounted even higher in

the wake of the superhero genre’s recent proliferation, because one misstep poses the threat of colouring an entire franchise with audience dissatisfaction. It is feared that a domino effect will result from the tent-pole strategy if a string of franchises with similar themes and storylines create disillusionment at the box office. Considering the time and money being invested in superhero franchises, studios may find it impossible to recover from the rejection of the genre. The treatment of source material will also play a deciding factor in targeting a diverse range of interest groups. Female audiences demand more three-dimensional, truly powerful and representative role models, whilst comic book fans demand adherence to classic storylines and parents demand comedic, family-friendly action. Meeting these expectations will not be mutually exclusive. Regardless of the flops and breakout stars we are sure to witness in the coming year, fans of all genres are in for a treat if Hollywood learns to take advantage of the diverse universe at its fingertips and explore a multitude of possibilities. In the next year, Hollywood studios should recognise that audiences can be volatile and unforgiving. It is now up to them to offer something dynamic, fresh and intellectually stimulating to an audience increasingly tired of superhero flicks. ■

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Richard Guan

Bitcoin and the block chain Does bitcoin live up to its hype as a revolutionary digital currency? Or is it the block chain that has far more potential in disrupting the financial industry?

nline marketplaces have largely replaced brick and mortar storefronts, but every online transaction that takes place still requires an intermediary – the banking system. This intermediary charges a fee on each transaction. Cut out the need for the middle man, and the banking sector will need to redefine their services to BITCOIN IS A DIGITAL ASSET AND PAYMENT SYSTEM THAT CHALLENGES BANKING AS WE KNOW IT remain relevant for the billions of online transactions that take place every day. Bitcoin is doing just that, by allowing consumers to do business directly, anonymously, and (relatively) safely. The brainchild of a mysterious person or team that claims it is a Japanese man called Satoshi Nakamoto, bitcoin is a digital asset and payment system that challenges banking as we know it. In traditional banking, each bank keeps its own ledger of all its accounts. When a customer buys products from someone else, your bank will lower the number on your ledger while the seller’s bank will increase the number on their ledger.

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Hence, each bank has their own ledger and comparing ledgers allows you to determine how much wealth you have. We pay the bank to keep this ledger updated and trust that the numbers are correct. The technology behind bitcoin, the block chain, essentially acts as a globally distributed ledger. Every single user of bitcoin has a copy of the global ledger, so all bitcoin transactions are in a sense public. Basically, a block chain contains every transaction ever executed in the currency. This eliminates the need for the intermediary and lets consumers do business directly with each other.

Furthermore, bitcoin has no central monetary authority. Instead it is underpinned by a peer-to-peer computer network made up of its users’ machines, akin to the networks that underpin Skype and BitTorrent. A global currency? There are several characteristics that a potential currency must have before becoming suitable to use as currency. It must have a store of value; it must be a good unit of account; and it must act as a medium of exchange. Bitcoin currently only fulfils the final criterion by being an

excellent medium of exchange. It cannot be a good unit of account because it can be split into many infinitesimally small parts, with goods and services often being sold for a fraction of a single bitcoin. Bitcoin can be expressed in units as small as a ‘Satoshi’ – a one hundred millionth of a single bitcoin. It is also prone to wild volatility; bullish news sends values soaring, while massive bitcoin heists such as the 2014 plunder of roughly 6% of outstanding bitcoins from the Mt. Gox Bitcoin Exchange dramatically reduce confidence. Finally, the number of bitcoins in the world will eventually be capped at approximately 21 million units. As such, central banks cannot impose inflationary pressure – a problem because if money supply grows too slowly, prices will fall, but wages tend to respond slowly and generally do not adjust downwards. As a result, unemployment increases while employed workers will hoard cash in expectation of further price reductions. The downturn gathers momentum. In essence, the bitcoin will cause chronic deflation if it acts as a global currency. The block chain While bitcoin is not the revolutionary cur-

rency that will replace the US dollar in the coming future, the block chain technology behind it might drastically change the landscape of financial assets. Data is permanently recorded in the bitcoin network through files called blocks. A block is a record of some or all of the most recent bitcoin transactions that have not yet been recorded in any prior blocks. This can be likened to individual pages of a city recorder’s record book, or a stock transaction ledger. Net blocks are added THE BLOCK CHAIN MAKES IT POSSIBLE TO LOWER THE COST OF TRANSACTIONS TO 10% OF THE CURRENT COST to the end of the record, and can never be changed or removed once written. Each block ‘remembers’ what took place in the minutes before it was created, and each is guaranteed to come after the previous block chronologically because the previous block’s hash or ‘identity’ would otherwise not be known. Each block is also computationally impractical to modify once it has been in the chain for a while, because

every block after it would also have to be regenerated. These properties are what make double-spending of bitcoins very difficult. The block chain is notable because it makes it possible to lower the cost of transactions to 10% of the current cost. Once banks learn how to incorporate the technology into their day-to-day operations, they will be able to significantly cut their operational costs. The block chain could be used to transfer ownership both in other currencies and of any kind of financial asset. This would allow the creation of decentralised exchanges which let asset holders trade directly, and money could be ‘programmed’ to come with conditions; for instance, it might be released only if a third person agrees. E-mail quickly replaced letters because it is quicker, free aside from the cost of an Internet connection, and mostly anonymous. The block chain behind bitcoin may prove to be a similarly significant shift in digital exchange. While the bitcoin itself is unlikely to become accepted as a global currency, or act as ‘money’ in the traditional sense, the block chain can be expected to be a potential game changer. ■ www.insideenterprise.org | 37

Alec Noble

The Chinese bull is stumbling The implications of the unforeseen devaluation

n December 1993, a sharp devaluation of the Chinese currency was followed immediately by an unforeseen plummet on the Shanghai Stock Exchange, as the index fell by 17.56% over a single week. In retrospect, it was a signal of the beginning of the Asian Financial Crisis. Just over twenty years later, it is no surprise that the parallels have businesses worried about China’s uncertain economic future. The decision by the People’s Bank of China (PBOC) to allow a depreciation of the yuan by 4.4% through three consecutive adjustments on 11 and 12 August 2015 was the single largest devaluation in twenty years. The move was both unanticipated and contentious, particularly as the last ten years have seen a consistent appreciation in the value of the yuan relative to the US dollar.

months include a weak Chinese property market, lessened domestic demand and weak exports. Exports dropped 8.3% between July 2014 and July 2015. Fiscal stimulus and cuts to interest rates have been generally ineffective in jumpstarting the economy, and thus observers have argued that this devaluation aims to boost foreign exports in order to bolster the economy. This tried and tested method works because as the value of the yuan drops relative to other currencies, China’s exports become cheaper to foreign consumers. Consequently, more people buy Chinese exports, and Chinese businesses benefit from larger sales, while maintaining profit margins. The bottom line is profit for Chinese business, which injects domestic investment, national income and spending into the economic cycle.

Growth stimulation China’s unrivalled economic growth since open market reforms in 1980 is inevitably starting to slow down. In the July 2015 quarter, China only managed a growth rate of 6.9%, suggesting that the annual rate may drop below government objectives of 7%. The last time China’s GDP growth rate fell below 7% was in 1990, when foreign loans and foreign direct investment to China were suspended in the wake of the Tiananmen Square protests. Triggers for the reduced growth in recent

Market oriented reforms Furthermore, the devaluation came with a new policy where the daily value of the currency relative to the USD is calculated from the midpoint of the previous day’s close and market-maker quotes. This move does align with market fundamentals, as it allows the market to determine currency movements, while also restricting the rate at which it appreciates relative to foreign currencies. Consequently the move should be seen as an essential fine-tuning of the exchange rate, rather than a self-motivated

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manipulation. Sceptics of the PBOC’s rationale believe that the central bank will continue to closely monitor and manage the value of the currency, thereby reducing market impact in scenarios where the market does not align with the direction that China’s government wants to move. Other parties unimpressed with the move include American politicians, who argue that the artificially low currency just reduces the competitiveness of US exports. The political resentment might potentially spiral into a currency war, increasing already fragile trade tensions between the two countries. China has denied these claims, and reiterated the importance of a market orientated economy, something that the US has been trying to persuade China to adopt for years. The good, the bad, and the ugly So how does this affect Chinese businesses? Firstly, if the cheaper currency does in fact increase exports, then exporting businesses will continue to thrive off the increased competitiveness and will experience increased foreign sales. Additionally, domestic firms will be more competitive within China, as importing goods such as clothing and electronics becomes more expensive, provoking consumers to switch to local products. One such success story is Chinese computer technology giant Lenovo. The

key to Lenovo’s successful mitigation of the adverse effects of devaluation is a fully localised supply chain management system. By sourcing all production inputs domestically, the lower exchange rate doesn’t affect the price of production. Global exportation of Lenovo products are primarily transacted in US dollars, so the devaluation benefits Lenovo by making their computers and tablets cheaper for overseas consumers, thus increasing total sales. Additionally, Lenovo holds minimal levels of foreign debt, which is protected through futures contracts to ensure a consistent repayment cost. This reveals Lenovo’s objective of strategically aligning its business to gain from the upside in the devaluation without being exposed to the downside risk faced by many of its competitors. HSBC analysts quantified the relationship between earnings and the value of the yuan, forecasting that for every 1% decrease in the value of the yuan, Lenovo’s earnings will increase by 2.5%. Textile manufacturers also benefitted in the same way, such as Shenzhou, which manufactures products for Nike and Adidas. However, the uncertainty of the currency and economy will hurt domestic entrepreneurial investment, and it will also reduce foreign direct investment. Businesses will be afraid to invest in expansionary ventures, thereby slowing the overall growth of domestic businesses. Additionally, any business involved in importing production inputs will have increased costs

of production as imports become more expensive. The most substantial impact will be experienced by Chinese companies with debt denominated in foreign currencies. These companies will have to pay much higher amounts of Chinese currency to pay back their debt. Due to the previous consistent appreciation of the Chinese currency, many domestic firms have held high foreign debt with the intention of repaying it as the currency continued to appreciate, so as to minimise the cost of their obligation. Australia’s concerns Globalisation has greatly heightened the effect of international economic decisions, particularly between Australia and China due to the high level of trade interdependence. As such, the devaluation also sent Australia shares into a landslide. The ASX200 index fell consecutively for six days after the announcement, and the Australian dollar itself plunged to a new six year low. Thus Australian investors suffered from the fall, and the future performance of Australian stocks now seems even more uncertain. Wary investors have decided to stay clear of the stock exchange until China’s volatile economic landscape becomes clearer. Furthermore, as China is Australia’s leading export destination, reduced sales to the Chinese market will negatively affect Australian exporters, particularly for electronics manufacturers, with Chinese businesses

opting to source from domestic suppliers instead. Additionally, if the devaluation does not solve the weaknesses in the Chinese economy that are beginning to shine through, then slowed growth in China will reduce demand for all Australian exports, thereby further slowing Australian growth. Outlook Evidently the future for the Chinese economy and business environment is extremely tentative, and potentially teeters on the edge of an inevitable recession after years of unrivalled growth. The consistent appreciation of the Chinese yuan can no longer be taken for granted, with future devaluations a probable outcome, sending domestic Chinese businesses into the wise strategy of hedging against these risks. The next stage is to gauge whether China can migrate away from export-led growth to a domestically orientated economy, which will improve long term stability and international power. The PBOC strongly believes that the devaluation is instrumental in achieving this goal, and time will tell whether the theoretical fundamentals can unfold. Deputy Governor Yi Gang supported the PBOC’s decision, stating that it was time for China to “trust the market, respect the market, fear the market, and follow the market.” It is clear that the market should be feared and respected, but as to whether it can be trusted, China has a lot left to prove. ■

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AN INTERVIEW WITH CHartered Accountants'

GE RAL D I N E M AG A RE Y

By Alice Wang

Geraldine Magarey is Leader, Policy and Thought Leadership at Chartered Accountants. Inside Enterprise speaks to her about the role of CA, diversity, and the implications of technology for accounting.

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Working as an accountant “I’ve never done a tax return in my life,” Geraldine smiles. When she was seventeen, she admits, she thought accounting was a dull career. Later, while working as a credit analyst at Westpac, she became interested in accounting. She joined PwC as a specialist auditor in London. “I used to go to Wimbledon and do the audit for the Wimbledon tennis tournament. It’s not all about sitting in an office. It’s not just a number crunching role. An accountant is more like being an interpreter, who extracts meaningful information from plain figures and communicates it to their clients.” After her stint at PwC, Geraldine joined ASIC as a senior manager involved in the strategic direction and management of the accounts and auditors team. After six years with ASIC, she joined CA, working with the government and key stakeholders on issues such as cyber security and cloud computing. “The roles are all very different, and that’s why I quite like accounting. It doesn't define you to do one thing. The whole Chartered Accountant qualification is so broad – it provides the foundation for all sorts of future possibilities.” Her current role involves advocating for policy and thought leadership. “Lots of people do find the term ‘thought leadership’ confusing. You can essentially think of it as about creating debate about things in the future. Take the digital currency bitcoin as an example – it’s raising awareness and more discussion as it becomes more mainstream.” Through a range of communication channels such as submissions to government, training workshops, publications and social media, CA encourages its members to understand the importance of sustainability and diversity. “We always put the public interest before selfinterest,” says Geraldine. “Some organisations focus on making sure that the right things are done by their members. We look at the greater society, the greater economy and what the right decision is for everybody.” Diversity in thought Geraldine stresses that staying competitive means ensuring diversity – including cultural, gender, sexual orientation and education diversity in the workforce. “Big firms need to have a very broad range of people working there in terms of their skills – mathematicians, scientists, philosophers. People with different skills and backgrounds will look at things from their unique perspectives, and that brings the diversity of thought. If we’re all the same, our vision will be too narrow and limited.” CA currently endeavours to help firms achieve employee diversity for this reason. In particular, CA advocates for flexible working conditions and hours to empower female employees. “We still have a long way to go,” Geraldine admits. “It’s now 50:50 for male and female employees at the entry level, which is promising. But in terms of senior ranks, the ratio drops sharply in favour of male employees.” 42 | www.insideenterprise.org

The impact of technology Cloud computing, big data, and business intelligence are redefining the way business is done today. However, many companies overlook the new risks in this new business environment, cyber security being one of them. “People thought you only need to have good firewalls and good security – but those days have passed now,” Geraldine says. “We have to focus now on developing the resilience of these companies. That is, how you can get the company back up and running quickly, and how you cope and react to the attacks. Companies need to be educated and made aware of all these things.” Meanwhile, technological trends such as big data are driving shifts in the interests of clients, necessitating a complementary shift in the services offered by accountants. “While traditional audit and accounting still play an important role, the services provided by accounting firms have evolved,” says Geraldine. “Now we’re looking at data analytics and social media, and issues of sustainability.” Technology is also bringing about more emphasis on the advisory role of accountants. With the introduction of cloud commuting to the Australian Tax Office, people can do tax returns by themselves on the website. Does this mean technology can replace accountants in the future? “Not at all,” Geraldine says. “Questions like ‘What actions are legal under the tax act? How can we structure the business in a different way to save more money and make the company run more efficiently?’ can only be answered by accountants. No technology can replace that.” ■

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An Interview with Koda Capital Chairman

STEVE TUCKER By James Pyo & Jenny Chen

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itting in Koda’s recently established conference room with an unobstructed view of the Sydney Harbour Bridge, it goes without saying that Steve Tucker has achieved a lot in order to get to where he is today. From being just another intern in MLC’s call centre, to the CEO of MLC, Steve is now the Chairman and founding partner of Koda Capital, among several other ventures. He has dedicated his career to paving the way for reform within wealth management. He met with us to discuss his extensive career, the process of driving structural conflict out of wealth management and what lies ahead for the industry.

Steve’s passion used to draw him towards the ocean – he was fascinated by marine biology, and wanted to study coral reefs. “However, like a lot of kids I wanted to make a living and make my way in the world, and unfortunately marine biology is a pretty obscure profession,” Steve laughs. “It wasn’t going to happen.” Pragmatism steered him away from a career of studying coastal life. At the University of Western Australia, he dabbled in the arts, studying philosophy, anthropology, history and English. When economics piqued his interest, he pursued an economics degree and contemplated becoming a stockbroker. Those hopes were dashed when he graduated in October 1987 just as the Black Monday

crash began to topple the stock market. “Nobody was hiring in stockbroking, but I was asked to have an interview at MLC. I didn’t know much about insurance at the time, and I thought I didn’t want to work for an insurance company.” He was nevertheless struck by the scale of the company and its role in Australian society. “MLC is an extraordinary company because it’s over 125 years old now, but it was founded with the idea that it could bring the benefits of life insurance to the ordinary Australian. When it was founded, the average life expectancy of an Australian male was about 42 years of age. They were all dropping off the perch, leaving the widows and their kids without anything to look after them. It www.insideenterprise.org | 45

"If you want to pursue a career in business, you need to understand how quickly it can change, and you need to enjoy all the highs and the lows."

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was a real social problem, and so insurance was a huge benefit. A century later, I realised that it’s still doing the same thing, bringing the benefits of life insurance to the ordinary Australian. What financial services does for people is fundamentally good – whether it’s for retirees living off their superannuation portfolios right through to young kids who are starting out, you need to have the product service advice opportunities that it brings. “I didn’t look back from there. I started as a graduate and I didn’t leave until 25 years later.” Despite staying with MLC for over two decades, Steve did not stay put within the company. His first rotation as a graduate was at the customer service call centre. He then moved to the superannuation department, a relatively new department at the time in the absence of compulsory superannuation or the superannuation guarantee charge. From there he went into a business development role in Sydney, before moving to Melbourne as a state manager and eventually back to Sydney as a national sales manager. He then became the CEO of the advice companies and was asked to become the CEO of the investment companies. “I would never have become the CEO of the group if I hadn’t worked around the way I did,” he says. “There’s often a time in your career when you get asked to do something that feels uncomfortable or a bit strange, and I think they’re the things you should think very hard about because they’re the opportunities that really give you the chance to have different experiences, and to show people that you can adapt.” Once a graduate who had little interest in insurance, Steve eventually found himself as the CEO of MLC. He stayed in the position for nine years. The purpose of MLC drove Steve throughout his time with the company. When he found himself in leadership roles, he sought to continue what he saw as a key part of the work – fundamentally doing good while also bringing the company success. Amongst his efforts was the push for commissions not to be paid in financial planning due to the potential to create a conflict of interest or bias. Accepting commissions from a product provider creates the incentive to recommend not the best

products to clients, but the product that brought in the best commissions, Steve points out. “The best system is to not have the product provider pay any commission. The client should simply pay for the advice without being afraid of a conflict of interest. All the way, we have tried to help shape the industry and improve how it worked.” The transition has not been easy due to corporate gridlock, with big companies operating in conformity; any company that deviated would find itself at a shortterm disadvantage. “What you have to do is to have a view for the long-term that it’s the right thing to do, and the rest are all going to do the same thing,” Steve says. “Alternately you can try to get a first mover advantage. But when you get a first mover advantage, you get a leading edge or a bleeding edge. In a system that has been built in a certain way for decades, that’s a very uncomfortable place to be.” Indeed, when MLC made the change in 2004, it found itself losing large numbers of advisers who were not confident in the transition. “We ended up having a couple of years of difficult times and a lot of criticisms. But now in 2015, no one questions that it was the right thing to do. I don’t regret it at all.” Koda Capital, the brainchild of Steve and former CEO of JBWere Paul Heath, emerges neatly in this shifting context for the wealth management industry. Their relationship goes back to their days in Perth, where they would run into each other occasionally at the pub. They designed Koda after deciding that funds management was the point in the value chain where there was a commercial opportunity. “It’s the point where the competition isn’t getting it right, and where the potential for growth is the biggest,” Steve says. “Right at the end of the value chain, where you talk to clients with wealth, that’s where we found the opportunity.” Koda provides independent private wealth management services, as it does not receive any commissions for recommending products to its clients, which eliminates conflicts of interest and ensures that clients get the best advice. “If you look at the way financial services are being delivered and the way financial advice is being given, it’s always

been about being part of a big institution. You’re in that structurally conflicted moral, where you’re manufacturing products in one part of the company and you’re giving advice in the other part of the company. Koda is about giving advice in an independent way.” Koda has been a breath of fresh air for Steve himself. “I was CEO at MLC for nine years. That’s a long time, and it’s a hard job. It was the right time for me to take a break and have a think about what I wanted to do next.” It was Paul Heath who would approach Steve with the idea to start a new firm, an idea that Steve embraced with enthusiasm. “I knew I wanted to stay in the financial services, and I

talked to Paul about taking a blank sheet of paper and designing a new type of firm in this business environment. I like the idea of being part of a new company that’s going to grow, because I can grow with it.” Outside of a large institution, Steve has found himself with the freedom to innovate through Koda. “Everyone is trying to adjust to the converging events that have taken place over the last few years. Retail consumer shock, the industry fund movement exploding in size, the financial planning community under a huge amount of government scrutiny. It’s a melting pot, and innovation comes out of it. But a fundamental problem in big institutions is that it’s hard to innovate

internally. Innovation largely comes out of start-ups like Koda.” Despite being a finance industry veteran, the appeal has yet to wear off. “I keep myself dedicated to it because I love it,” Steve says. “The trick is ensuring that you stay excited by business, that you’re truly enjoying what you do every day. You have to do every job with the same amount of energy and passion. If that falls away, you need to rethink your plans. If you want to pursue a career in business, you need to understand how quickly it can change, and you need to enjoy all the highs and the lows. It can knock you down, but it can also take you to amazing places where you’ll be able to find success.” ■

"Everyone is trying to adjust to the converging events that have taken place over the last few years." www.insideenterprise.org | 47

Grameen Australia By Terence Zhou

roadly, microfinance refers to relatively small business loans, generally given to developing countries. Often no more than the equivalent of AU$50, they are commonly sought by both established businesses and entrepreneurs who lack access to more standardised financial institutions. However, what distinguishes microfinance from simply being another loan shark service is its moral intent. The overarching aim of microfinance is not simply to facilitate business expansion. Rather, it seeks

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to create sustainable businesses that alleviate poverty in the community, and empower individual business owners. Generally, microfinance institutions achieve this through a strict screening process for loan applicants, and by providing them with practical financial training and ongoing business support. The modern concept of microfinance came about through the efforts of Muhammad Yunus, who founded the not-for-profit organisation Grameen Bank. For this, he won

Microfinance and the Community Loan a Nobel Peace Prize in 2006. Inspired by his model for microfinance, many similar organisations arose, and were eventually adopted into the Grameen Bank family. These include Grameen Foundation Australia (GFA), a microfinance organisation that has extended across the entirety of South-East Asia. GFA has lent AU$10.5 million to borrowers in the past year, resulting in a 15% increase in the average loanee income. Recently, they have expanded to the Philippines, an area where microfinance is central to the business milieu. Michelle Sawyer, Operations Manager of GFA, spoke to Inside Enterprise about her views on the challenges that GFA faces. Microfinance in the Philippines The concept of small loans is not foreign to the Philippines – there are over two hundred banks, and another 2,000 microfinance institutions in the country. These are estimated to serve over seven million clients. “We definitely focus on social businesses, ones that have a poten-

tial to be bigger and with greater capacity to start hiring within their communities,” Michelle says. However, she reveals that many of these alleged institutions have abandoned the moral compass that guides microfinance in favour of greater profits. “It’s got a bit of a bad reputation in the last few years, particularly because loan sharks have basically labeled themselves as microfinancing companies,” she says. “We know of people in the community who have been charged weekly interests rates of 35%.” Michelle points out that there are banks in Asia that are the reason why many regard microfinance with scepticism. “They started as very small microfinance banks with a very good goal. Some are now very large and make billions of dollars in profits. They are no longer a microfinance bank but they brand themselves that way. They are for-profit banks. These processes have damaged the reputation of microfinance. It is very disappointing and heartbreaking. That’s something we have to grapple with because many communities that have been through programs are very cynical because they had been mistreated.”

GFA’s pilot microfinance operation in Manila only reached six hundred borrowers. However, Michelle remains optimistic despite the struggle to promote GFA’s microfinance in Manila, where loan sharks abound. “We have found that word of mouth is amazing and the impact of our program is spreading and the demand is far exceeding our expectations,” she says. “As we see the evolution of microfinance into the realm of social business, we now have a much more innovative way of using funds to drive really big community-wide change.” Differentiating through social businesses In the face of such saturated competition, Michelle points to GFA’s focus on social businesses as the foundation for their success in the Philippines. These are microfinance-funded businesses that are specifically designed to address community needs, such as employment and wealth redistribution. The services they seek to provide include basic health facilities and amenities. Currently, GFA has spent approximately AU$2.4 million developing a social business training hub, and creating seven social businesses in the Philippines. Most of the investment has come from private and corporate philanthropists, though Michelle acknowledges that some parties may want to reclaim their original investment. From her perspective, the successful nature of these social businesses generally means that this is not an issue. “After all,” she says, “our model is specifi-

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“ AS WE SEE THE EVOLUTION OF MICROFINANCE INTO THE REALM OF SOCIAL BUSINESS, WE NOW HAVE A MUCH MORE INNOVATIVE WAY OF USING FUNDS TO DRIVE COMMUNITY-WIDE CHANGE ”

cally to generate profits to go back into the business.” The key element that is required for a successful business is proper business training. GFA’s partnership with PwC in Manila means that prospective loaners have to create a basic, but effective business plan at the end of a compulsory two-day course. This business plan is submitted for their loans, and assessed by the community and GFA before the loan is released. Furthermore, the majority of this training takes place within the social business hub, allowing entrepreneurs to meet each other, and potentially form a community, a shared nexus of innovative thought. “We are currently focusing on a more structured mentoring curriculum as we see our role as providing both financial and social support,” says Michelle. “We see this as a unique model. Our goal is to ensure these companies can become self-sustainable.” Health and security However, Michelle is not fooled about the difficulty of breaking into the Philippines. Working in the developing world has meant dealing with the complex issue of health and security – whilst GFA has strict training processes in place for buyer security, things can easily go astray. “Once we had a purchase of chickens from an outside farm,” Michelle says. “The chickens were supposed to be quarantined, but they weren’t. Our chickens got cholera and we lost five hundred chickens. For a very small business, that was horrific because we lost a quarter of our flock. We had two 50 | www.insideenterprise.org

large orders which couldn’t be completed.” After the incident, the GFA team brought Australian experts to visit the farm and review the program. “From their proposal, we are now implementing some changes to the program, management, and staff training,” Michelle says. “What we’ve had to do is create a program that works within the thinking of the staff. It’s aligning what needs to be done with the understandings and concepts of the people we work with to respect the fact that we are working with the most disadvantaged.” Looking forward Whilst GFA is still taking steps to transpose their operations to a unique Philippine context, Michelle expects the organisation to upscale in the near future. The social business hub, which remains the cornerstone of GFA’s poverty alleviation mission, will undergo constant refinement and expansion to aid a greater number of borrowers. Indeed, unlike other microfinance institutions, Michelle is confident that GFA will not lose sight of its ultimate goal in reducing community poverty, and will continue to provide potential entrepreneurs with financial, managerial and society-focused support. GFA’s initial reception in the Philippines has been volatile, but mostly warm. “That’s one of the big journeys in the developing world,” Michelle says. “No matter what plan you write, it’s never going to be right and you’re going to have to constantly change what you expect.” ■

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THE

STEM OF THE PROBLEM VEENA SAHAJWALLA AND CHRISTINA CHUN ON WOMEN IN STEM REBECCA CHING

n an era of technological innovation and vaulting shifts towards automation in Australia’s and the world’s workforces, there is an increasing need for workers to develop skills in science, technology, engineering and maths (STEM) disciplines. Traditionally, men have dominated the workforce in STEM industries while women have lagged. In the 1970s, for instance, women made up 7% of

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the workforce in STEM industries. While that figure rose to 23% in the 1990s, progress has stagnated in the past two decades. Currently, women still comprise only 26% of the STEM workforce. Beyond the gender diversity arguments, there are also strong pragmatic reasons for getting more women into STEM disciplines: simply put, fresh perspectives foster technological progression and innovation.

Professor Veena Sahajwalla, head of UNSW’s Centre for Sustainable Materials and Research Technology, understands the need for Australia to adapt to these rapid changes in the industrial workforce. Veena is a pre-eminent materials scientist and engineer. The Australian Laureate Fellow is internationally acknowledged as the inventor of 'green steel', which uses high-temperature reactions

“ CURRENT SOLUTIONS, IF THEY EXIST AT ALL, FAIL TO ENGAGE SCHOOL STUDENTS IN A PRACTICAL SENSE. WE UNDERESTIMATE THE CAPABILITIES OF TOMORROW'S GENERATIONS ” to transform waste into commercially viable steel. Veena grew up in an industrialised setting where she experienced firsthand the initial stages of technological growth. This sparked her interest, and even at a young age, she had what she describes as a “fascination in asking weird and wonderful questions,” which acted as the foundation for her eventual research and work in environmental sustainability. “One of the most important traits for participants in STEM is a neverending sense of curiosity,” she says. “That came naturally to me. But a lot of my female friends demonstrated skill and interest in STEM areas, and many

of them didn’t want to continue with it as a profession. It’s quite strange and upsetting.” One recognised cause is that these traditionally male-dominated fields breed a culture of ‘bro-coding’, isolating women and discouraging them from areas they would otherwise enjoy. This presents a challenge that Australia needs to overcome to compete with STEM powerhouses, such as the USA. Gender balance remains a struggle across the globe. Christina Chun, founder and CEO of Make a Mark Project (MAMP), acknowledges that there are numerous reasons for the problem. “There’s a lack of female leaders in STEM, which

in turn is affected by professional and industry segregation, stereotypes, discrimination, poor maternity policies, the list goes on,” she says. “Personally, I’m most concerned with the large confidence gap between the genders and an overall failure to encourage women in these areas at a young age.” This, she emphasises, is a problem brewing at the grassroots level. MAMP’s comprehensive surveys of NSW students in the past year revealed a troubling reality: “The problem isn’t one that suddenly emerges after graduation or during university, it starts earlier in school,” Christina says. “Current solutions, if they exist at all, fail to engage school students in

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a practical sense. We underestimate the capabilities of tomorrow’s generations with our own past ways of thinking, and this really doesn’t work in STEM industries which are so fast moving. By the time we react and they get to university it’s often too late.” Forging the way forward Having first-hand observed the need for Australia to shift its focus to STEM fields in order to compete with other countries economically and technologically, both Veena and Christina have taken huge steps to solve this problem. Veena is determined to connect with younger female students to encourage and promote a love for STEM disciplines. She founded Science 50:50, a program that is dedicated to inspiring Australian women to pursue degrees and eventually careers in science and technology. The program’s name makes a simple point: 50% of the population is female, so why do they not make up 50% of scientists and technologists? “We aim to create a culture of collaboration,” Veena

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says, “where new ideas are supported, encouraged and nurtured.” Science 50:50 helps generate internships and scholarship opportunities to allow girls to gain experience in scientific careers. It has also sought to encourage interest in science and technology among young girls through numerous school visits where students are paired with 50:50 mentors. Like Veena, Christina is determined to recalibrate the gender balance and echoes the point that collaboration is critical. “Just because the problem is so widespread doesn’t mean that with some innovation and collaboration from all levels of industry, university and high school we can’t tackle it,” she says. This is the thinking that drove her to found MAMP after an extensive stint in education and psychology. The organisation works to give female high school students the technical skills and confidence to succeed, including in STEM disciplines. Its extensive range of programs target a range of high school years. It has successful not-for-profit

programs with major corporations including Guiding Steps, which covers leadership and resilience training, and Raise the Bar, which covers vocational solutions for secondary students. MAMP is also collaborating with Collective Insights to help school students interact with industry and universities, and Cadenza, a STEM-based problem-solving circuit. MAMP has received overwhelmingly positive feedback from both industry representatives and students, with over 95% demanding further training. Christina is optimistic about the prospects for more female leaders in STEM. “Obviously the solution calls for sincere commitment from everyone, not just lip service,” she says. “Particularly as there's strong pragmatic and moral arguments for making sure that Australia harnesses all its talent in future years. I’m certain we can do it.” ■

Student Room Sydney Genesis Guangyong Chuang

Josh Della Vedova, founder of Braingain, addressed a major issue ydney Genesis has dedicated itself to innovation: to the disruption of standard practice and the creation of positive that every adult is familiar with: a decline in mental acuity over change. It does so by supporting and harnessing the creativity long hours of study or work. He introduced Braingain’s version of a of its student participants – since its inception in 2008, Sydney supplement that aids in cognitive optimisation, or nootropics. SaGenesis has provided workshops, mentoring, networking, and hibajot Kaur and her father, the founders of Gale Force, introduced funding to over 700 passionate students with business ideas look- a prototype invention – an attachment for rooftop whirlybirds that ing to make them a reality. As Dr. Richard Seymour, the Entre- harnesses clean wind energy. Yen Tran pitched Tourisi, a convenipreneurship & Innovation Program Director of the University ent travel planner that provides tailored trips based on social media information and learning algorithms. Wilof Sydney puts it, “There is no learning withliam Ruben, founder of Songoose, presented out action, and no action without learning.” Sydney Genesis is a cross-faculty entrepre- Sydney Genesis is a cross-faculty a web platform that might create an additionneurship program at the University of Sydney entrepreneurship program at the al source of revenue for musicians around the that has seen great success, with over 50% of fi- University of Sydney that has seen globe by facilitating the sale of custom songs to fans either for gifts or special occasions. nalists building their start-ups since 2010. “We great success Finally, Seamus Thomson and his cross-disoffer the students the opportunity to give their ciplinary team of five, from biomedical engibusiness ideas a go while we educate them in business and offer the possibility to work with outstanding entre- neering and mechatronics to law, presented on Vasoprint, a prodpreneurs and business leaders as mentors,” says Cayetana Martinez, uct with the potential to revolutionize the surgical profession. The the program coordinator. “It’s simultaneously run in Australia, device uses scanning technology and 3D printing to create accurate Myanmar, Indonesia, and Vietnam, creating an international models of internal organs unique to the individual being operated network of university entrepreneurs in the Asia-Pacific region.” on for surgeons to study and perform pre-surgery preparation. At the Sydney Genesis finals pitch in October 2015, the contestants With an idea that would significantly increase surgical from backgrounds spanning across ten faculties ventured far beyond safety, and numerous surgeons around Australia already exthe traditional, into areas of medical technology, health and wellbe- pressing interest, it came to no surprise that Vasoprint went ing, renewable energy and more. The seven teams were judged by on to win the Most Disruptive Enterprise Award for $2,000. a panel including Brian Dorricott, a lean commercialisation expert Braingain was credited with being the Best Business Plan for and investor, Jo Burston, whose venture, Inspiring Rare Birds, seeks another $2,000 and a six-month virtual office at Servcorp. The to become a hub for female entrepreneurs, and Ehsan Fallahi, a Best Woman Leader was awarded to Sahibajot Kaur of Gale Force, startup lawyer who actively provides legal counsel for entrepreneurs. who was given $1,000 and a Meteorical lean commercialisation www.insideenterprise.org | 55

workshop provided by judge, Brian Dorricott. Songoose also ended up taking home a prize: $1,000 for the People’s Choice Award. With tailored feedback from the judges, each of the finalists look to the future and critically ponder how to best refine and pursue the newest iteration of their idea. Sydney Genesis provides a workshop at the end of the program where managers of accelerators and incu-

bators are invited to present their programs and explain to the students how they could help them bring their ventures to the next step. The Sydney Genesis program runs every semester and is available to all University of Sydney students and alumni.

UNSW Management Society Nancy Xie

their leadership, teamwork, presentation and problem solving skills, eventually building up to a stimulating case study. In 2015, the case study was a V05 marketing case provided by Unilever, which tested the participants’ adaptability and innovation, especially as many did not have prior experience working on cases from a marketing approach. The top three teams at the CLC case presentations were later MSoc Initiative Award (MIA) invited to a special session at the Unilever MSoc has recently introduced its unique The Career Leaders' Challenge is CBD office, where they were given the MIA initiative, an award that students gain a great opportunity to practise opportunity to refine their presentation, present after completing the program of theoretical workshops, practical competitions and critical thinking, teamwork and to an expert panel of judges, and network. “CLC was a great opportunity leadership days. The program is aimed at time management skills to practise critical thinking, giving recognition to students who take teamwork and time management skills,” the initiative to be actively and consistently involved with MSoc. Consistent participation in these events says Alex Zhong, one of the finalists who was invited to effectively develops the skills of members, who are given the Unilever special session. “You need those skills for the opportunities to showcase their skills at major events throughout group case studies that you showcase to the judging panel.” the years, such as the Meet the Managers Night, and the Career MSoc runs many other events and initiatives throughout the year. Leaders’ Challenge. Spots are guaranteed for all MIA participants. Larry Stalis, an MIA participant, recounts his MIA experience as “an amazing personal and career development journey.” “The best thing you can possibly do to develop yourself is to just get exposure to as many opportunities as you can and take them,” he says. “MIA is definitely an opportunity you do not want to miss.” he vision of UNSW Management Society (MSoc) is to help its members translate their visions into reality. The society focuses on personal and professional development, equipping members with transferable skills that can assist them in achieving their goals. It will be running popular initiatives throughout the year.

Career Leaders’ Challenge (CLC) The CLC is a compulsory part of the MIA initiative, in which representatives from IBM, Unilever and the UNSW Business School lead teams of participants through workshops. Participants engage in a full day of activities that bring out

AIESEC: Helping Guarantee Employment

ccording to the 2015 World Economic and Social Outlook report, there are 74 million unemployed youth in the world today, and this number is growing. In Australia, the youth unemployment rate is double the national average and competition for good jobs is intense. Moreover, only 68% of bachelor graduates from the class of 2014 had a full-time job four months after graduating. When AIESEC tried to probe this scenario using its global survey Youth Speak, the 40,000 responses from 100 countries and territories highlighted the need to grow students into self-aware, 56 | www.insideenterprise.org

solution-oriented world citizens who seek to empower others around them. These are all qualities that are valued by employers, and they are all provided by the AIESEC Global Talent and Global Citizen programs. The former sends students to develop professional skills in fields ranging from teaching, marketing, and start-ups in a foreign environment, while the latter places students in education, literacy, development and capacity-building projects. Most students believe that professional experience can support the future career development. They are not wrong: research shows

that graduates who did any work in their final year were more likely AIESEC participants in professional environments overseas. Eduto be employed full-time after graduation than those who did not cation programs in particular call for participants to understand work while finishing their degree. Employers value experienced how to lead classes as they teach valuable English skills to primary students, even if it is outside their field of study. Professional in- and high school students. The AIESEC internship and volunteer programs provoke the self-awareness needed by ternships for students tend to be valued more a good leader by launching students into situif they are undertaken in another country; emThe AIESEC experience widens ations where they need to communicate effecployers appreciate graduates who have a global tively with their colleagues and clients – they worldview and can offer a broad and diverse the outlook of participating understanding beyond their local surround- students by sending them abroad need to overcome language barriers as well as differences in business and culture etiquette. ings. The AIESEC experience certainly widens to volunteer or intern If you are a student or recent graduate, you can the outlook of students by sending them apply for the Global Talent Start Up program abroad for two to twelve months to volunteer or intern. On both programs, participants meet new faces and come to become an intern in start-ups based in India, China, Indonesia in contact with diverse values, cultures, and problems to solve. or Thailand. Participants are given the chance to intern in the fields Employers also look for leaders – people who are not only skilled of project management, marketing, sales or IT. The Global Talent but innovative, responsible, and flexible in dealing with uncer- program is the perfect opportunity for passionate students and tainty and the unique challenges brought about by globalisation. budding entrepreneurs to closely observe how a start-up operates Leadership skills are rarely intuitive – they are developed through and also develop their business acumen to help the company grow. experience, such as the volunteer and intern roles undertaken by

Chartered Accountants Australia and New Zealand Don’t let someone else get your dream job, register for the Employment Evening 2016. As a full time student, researching your options for a career in business can be time-consuming. With study, exams, work commitments and a social life, it is often difficult to find the time to attend many careers fairs. However, CA’s Employment Evening brings together some of Australia’s top employers from a range of industries all under one roof, ready to meet students, discuss the jobs they offer and walk interested students through the application process. Making a good impression at Employment Evening could mean getting a foot in the door. Employment Evening also offers students the opportunity to hear from HR advisors on how to successfully apply for available roles and from real Chartered Accountants about their career journeys. Employers and career experts in the industry will be present to offer tips, and candidates who have recently completed the CA Program will be in the Leadership Lounge to discuss their experiences. The Chartered Accountants ANZ Employment Evening is created especially for students who are interested in embarking on a career in business, finance or accounting. Every workshop, exhibit and information pack has been tailored to help you make the most of your talent and ambition. Event details: Date - Wed 9 March Time - 4.00 p.m. to 7.00 p.m. Location - Crystal Ballroom, Luna Park Who should attend - Second year and penultimate year students For more information and to register go to charteredaccountantsanz.com/employmentevening www.insideenterprise.org | 57

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