Category: Uncategorized

Three Skills Your Future Depends On

Posted on by Steve Sammartino

Once you’ve made it to the upper echelon of any field – you only need three core competencies:

Strategy, Finance and People

It doesn’t matter which industry you are in – these are the three definitive skills that will keep you there and take you further. This doesn’t mean that you go out and do a Grad Dip in Applied Finance or become an HR manager. It means you understand the three fundamental leadership skills. Here’s the context around which you need to think about them:

Strategy: You need to understand the shifts in your industry and consumer behaviour. You need to know how they pertain to technology and business life cycles. You need to develop a plan for steering your organisation in the right direction and be able to articulate the rationale. This will include resource allocation and organising the factors of production to make the plan possible. All of this needs to be done within the context of where you are today.

Finance: How are you going to finance the operation? How will you garner resources to make the needed shifts possible and what will your revenue sources of tomorrow be? It will require an understanding of how accelerating technology changes your prevailing business model. Is the pendulum swinging towards your business model or away from it? You will also need to make sure the current business model matches your cost base – it becomes a game of alignment.

People: Here you need to install competent people in the right places who can implement your plans at a tactical level. It’s about organising and motivating the troops, while ensuring they have the resources and compensation to keep their heads in the game. They also need to have bought into your mission and strategy. It’s also about the people outside of your organisation – you need to influence others within your value chain.

These are the three things great leaders focus on. They don’t do things, but become architects of their own future through strategy and finance, as well as managing the people who make it happen.

The good news is that you don’t need to wait for permission to start doing these things. In fact, the opposite is true. If you do these things informally, in time you’ll be invited to be the person who does it as a leader. Step up.

– – –

Keep Thinking,

Steve. 

Inventing Tomorrow’s Jobs – COVID-19 series

Posted on by Steve Sammartino

The jobs of tomorrow all come from the same place, solving the problems of today. If you have a little look around, you might notice we’ve got a few. The Climate Crisis – well, that should be at the top of everyone’s list. The science is in. The science also has two clear sides to it. Firstly, climate change is real. Secondly, we have all of the technology we already need to solve it. So let’s get busy.

Here’s a crazy fact: just three hours of sunlight provide enough energy for all of humanity’s needs over an entire year. Yes, you read that right. That is 160,000 terawatt hours of energy. If only we had a way to capture, store and distribute it…Looking at the way many leaders from around the world are acting, you wouldn’t be out of place thinking a shift in our power generating structures wasn’t possible.

Ironically, that is the problem: the power structures. The other kind, though. The kind that control some of the world’s most profitable industries and influence global policy with greenbacks. If I could make only one change to the world – just one – it would be to outlaw lobbying and political donations in all their forms. If that went away, politicians would make the decisions we need them to, not the ones that fund their re-election campaigns. We just might have struck some dumb luck with the COVID-19 crisis, as governments the world over may have to start investing in large infrastructure projects to get the economic wheels turning. Please step forward: renewable energy.

The Truth about Jobs: Since the COVID-19 crisis, the USA has lost over 20 million jobs and Australia has lost just under 1,000,000, according to the ABS. Some good news is that the renewable energy sector is flying. The number of FTE’s is now 27,000 with a growth rate of 27%. The sector this year should have more people employed than coal does directly, which was at 38,000 FTE’s last year and rapidly declining, as plants shut down and fossil fuels struggle to compete with renewables becoming exponentially cheaper.

The investment in renewable energy makes perfect sense, because it reduces the marginal cost of both a major industrial and household expense. As people’s finances likely become tighter, anything that both creates employment and reduces the cost of living is a double win. In a recent report by Beyond Zero Emissions, it was predicted that practical projects to decarbonise our economy could create 355,000 jobs a year. A year! That’s almost ten times the number of people who currently work directly in coal, and yet we have a politician who became our Prime Minister bring in lumps of coal to Parliament as if it were the future. I’m going to say it straight out, regardless of which side of the political fence you sit on: what passes for leadership in this country in inventing a net positive future economically and ecologically is beyond embarrassing – it is deplorable. Where have all the real leaders gone?

The Economic Cost Lie: Another point that needs to be clarified is the cost of change. Some estimates say that adapting to climate change could cost us up to $300 billion per year. But it’s not true – it will actually generate $300 billion in revenue a year. See – here is the lie that is told by the Government and business. They act as though a shift in revenue is a cost to everyone, when in fact, they are referring to the cost to themselves, not society. It’s basic economics that every cost is also revenue for someone. One person’s wage is another person’s expense. Every transaction needs two parties, of which one always receives. It is even better if the expense is on something new, something that never existed before, because that is the process that grows the economic pie. The truth is, incumbents (think fossil fuel industry) are talking about a cost to them, not to society or the economy. It’s pure protectionism at our expense and one that creates a risk to our species. It’s a lie we’ve got to stop believing if we want to invent a new energy reality.

How Much Solar? In order to provide enough power for all of Australia’s needs – car, bus, plane, train, buildings, infrastructure – we only need an 1,200 terawatt hours of power a year. Using solar energy, today’s technology would then only require a little over 5,000 square kilometres of solar panels. Sounds like a lot, but it is just 71 x 71 kilometres. It looks like this below:

 

What we have on our hands is a choice. A choice to solve a problem and generate the economic growth that goes with it. We have the technology and we have the desire – but it’s up to us to demand it from those in charge. If they don’t want to change their minds, then we must change who is in charge. In the end, we have a democracy and we get the future we demand – not the one we deserve. It’s time to start demanding.

– – –

Keep Thinking,

Steve. 

How to make the Gig Economy ‘Work’

Posted on by Steve Sammartino

Over 100 million workers around the world are hoping even harder than their peers that they don’t come down with coronavirus COVID-19. Who are they? Those working in the gig economy, where benefits like sick leave are something they can’t rely on. The worst part? If they do get sick, they might just have to keep on working, which puts everyone else’s health at risk. It’s about time we got innovative to improve the gig economy for everyone.

Let’s be clear on one thing – the gig economy isn’t going away. It is not a short-term aberration, but a long-term shift. Currently, the number of gig workers is growing more than 30% every year.

In the past, the reason we became employees was because the place of work was centralised – all the tools to do our jobs resided only in factories and offices. It was also difficult to find, train, ratify the skills and organise the work of people who weren’t under a company’s direct control. But the trajectory of technology today tells us that this is no longer the case. The traditional employee is no longer required and lower paid gig work is just the start of a freelance future for all. Sure, companies will still need to get things done, but they don’t need employees. The latest ABS data shows that 30% of adults participated in freelance work this month. Additionally, it is predicted that by 2027 there will be more independent workers than PAYG wage earners in Australia.

At the dawn of the industrial revolution, the major tools of production (think factory), became centralised. Before this, the large majority of labour was undertaken independently, either on the farm or as a craftsman. When we industrialised, people came to the cities en masse to partake in higher-paid work for large firms. To remove the friction of finding and training every week, workers became employees of the firm. This quasi-permanent engagement between the parties extended into office work as we entered the information phase of industrialised economies.

Fast forward to today and the friction of labour is being removed rapidly. The technology in our homes is as good as any office. Most forms of information work can be done anywhere, with NASA-powered computers in our pockets. Disparate labour can be organised around the world too, in real time. In the future, I believe that most people won’t be employees, but ‘digital craftspeople’ who hire their time to one, or many organisations. I’ll go as far to predict that within 50 years we’ll see global multi-billion dollar corporations with exactly zero employees. All their work will be performed by independent contractors – Uber on steroids. This will happen not only because it’s logistically possible, but far more profitable.

Problem: The current situation for gig workers is sub-optimal. Workers fought hard over decades for access to safe workplaces and fair remuneration, but these rights are now being eviscerated. Benefits like annual leave, sick leave, training, OH&S standards and superannuation have conveniently become the responsibility of the worker. This is a problem when we have economic shocks like the coronavirus. We don’t need to ban gig work, or make gig workers employees. We can be smarter than that. All we need is structural innovation and we only need look as far as superannuation to find an answer.

Gig Worker 2.0

It wasn’t until 1983 that employee superannuation contributions started with The Accord and became mandatory in Australia in 1992. Prior to that, superannuation was a benefit bestowed on only the fortunate few and workers with strong unions. What we need now is a new kind of gig worker benefit scheme akin to superannuation. This benefit scheme would provide a form of security for gig economy workers. For example, a simple percentage loading on labour fees could go into a fund to create employee-style benefits (annual leave, sick leave, superannuation etc) for gig workers, paid for by the firms hiring gig labour. Gig workers currently forego these benefits many of us take for granted. This way, gig workers can maintain their living standards and dignity while they are making their economic contribution . Governments the world over would do well to implement such a policy.

While the numbers would need to be verified, I would estimate the gig worker loading should be around 20%. While that might sound quite high, studies show that employee on-costs are anywhere up to 50% of their wages. If firms employing flexible labour say it won’t work – then I’d argue they don’t have a sustainable business model in the first instance.

The fund would need be in the worker’s name and ported wherever they perform gig labour. If we managed to pass such a law, our economy would be better placed to cope with the long-term shift to independent labour gigs, remain flexible, but also be able to cope with periodic shocks to the economy. It could also invent an entire industry for Australia – one whose model could actually become an export.

A New Industry

At some point in the near future, a smart government somewhere will implement such a policy (which is better than forcing gig workers to become employees), and lead the world in inventing an entirely new industry. In Australia alone, our Superannuation industry (which was spawned by the union movement) is now a $2.7 trillion industry and the 4th largest pension fund asset holder in the world. We’ve led the way. If we are first to set up this kind of a policy structure, we could export the financial management model of gig support the world over. However, this takes foresight, courage and political will.

Unions & The Gig Economy

Union memberships are in steep decline – it’s now less than 15% of workforce. In 1960, it was 60%.  It is difficult to see a future for unions. unless they reinvent themselves and pivot to offering non-union workers something they need in the future. Fighting for gig economy workers is the perfect innovation staring the union movement in the face. Unions should start focusing on representing new types of labour, who have powerful forces (like Big Tech) exploiting them. Enter, gig workers. Fuelling the erosion of the union member base is a myopic view of the type of labour that fits their model. They have an opportunity right now to go beyond traditional blue collar work, start a movement and become relevant again. Instead of using standover tactics to create profit share and inordinate wage rises, they can focus on what gave them relevance over 100 years ago, and that is fighting for fairness and a sustainable workforce.

If there’s anything we need in our economy, it is regulatory innovation to match the rapidly changing technology driven labour market. Yes – governments need to innovate too.

I spoke about this topic on ABC radio yesterday – click here to listen.

– – –

 

Do this before you launch a startup

Posted on by Steve Sammartino

I am often asked by budding entrepreneurs if their new startup idea is any good. But rather than do that, I tell them how to check it themselves. This is what I tell them:

It doesn’t matter what the business idea is – the discovery process to determine its validity is always the same. It is a simple set of questions to answer. They need to be answered before anything is made or a dollar is spent. Firstly:

Is anyone already doing it?

You’d be surprised how shallowly people dig to find out the answer to this question.

If yes:

  • Why didn’t you know about it already? Are you in the target market? Is it poor promotion or just that the market for this is actually quite small?
  • Is the business doing well or poorly?
  • If it is doing well, do you think you could compete and do it better in some way? If the answer to this is no, stop here.
  • If it is doing poorly, find out why. Is it poor execution, underfunded, poor location, no scale, bad business model, too early for the market or for other reasons? Or is the idea just not as good as it seems?

If your idea is already out there and it isn’t setting the world on fire, it’s probably a warning sign.

If no:

  • Have people tried it before and failed? Who, when and why?
  • Have people decided the idea isn’t any good or that it doesn’t have a good way to earn money doing it?
  • Or is it that your idea is actually quite novel, exciting and worth pursuing? If so, only then is it Go Time.

While this list isn’t particularly long (it certainly isn’t exhaustive), it’s a human and business-centric model of understanding demand, opportunity and complexity. It’s a model which forces us to think through a business supply chain. It’s a reality check.

Go Time: The worst mistake we can make when starting a business is actually by starting a business. Instead we need to run some experiments first – find the quickest, cheapest way possible to test if your idea solves the problem of your target customers. It doesn’t require a business or an infrastructure, just a hacked together solution that replicates the potential of the larger idea. A test. At this point you need to ask for money from the customers you seek. Asking for the order – real money – is a kind of commercial truth serum. By doing this, we often discover what people say they’ll do and what they actually will do are two very different things.

If all of this seems a little too arduous for a new business idea, then just remember it’s far more arduous going into a venture that was dead before it was even born.

– – –

If you haven’t already – be sure to check out Future Sandwich Now-Soon-Later

The Secret Innovation Budget

Posted on by Steve Sammartino

Research & Development and Marketing traditionally lived in different worlds. R&D for innovation purpose happened in secret, in the lab, while Marketing was mostly just advertising. The advertising itself? Well, that was generally about convincing people to buy what the company could already make. It was rarely about the future and what the brand might become. Smart companies however, have merged these two disciplines. It’s a ‘trick’ any firm big enough to have a marketing budget might want to embrace. Yes, the marketing budget should really be an innovation fund, and vice versa.

In times of great change we idolise the new. The wonder created by what was once the realm of science fiction, are todays most shareable artefacts online. Cool stuff we see for the first time like an Amazon drone delivery, a Google driverless car, or an Uber air taxi get viewed millions of times, voluntarily, without media expense. These companies are telling the market, we are inventing the future. If you’re a large corporation today, and you’re not inventing the future, during such a revolutionary time, then you just might be inventing your own demise.

But here’s a few questions worth asking:

  • When was the last time you had something delivered via drone?
  • When was the last time you took a ride in a driverless vehicle?
  • When did you last hover above traffic in your air taxi?

If you’re like most people, you haven’t, yet. That’s not to say that these things aren’t on the way – they certainly are, but in truth these companies have purposely talked up the technology many years before any of them were actually functional, let alone a commercial reality. This is where the trick part comes in. The time lag between the concept phase and the reality of these innovations being in market is a great brand building exercise for the firms smart enough to do it. Cleverly, their R&D has become their advertising. They’ve earned free global media attention and further ensconced themselves as innovators.

The perception this creates in the market isn’t just nice to have. It can also have a massive economic impact on the firms financially. Just compare the unit sales, price earnings ratios and valuations of firms serving the same set of customers:

Automobiles:

  • Tesla makes 245k cars per year, and has a PE ratio of infinity (no dividends yet), and a market cap of $48 billion.
  • Ford makes a 7.9m cars per year (one per 4 seconds) and has a PE ratio of 9.3x, and a market cap of $34 billion.

The market has clearly voted on how it values innovation.

So could an old world industrial company use innovation as a brand communication tool? Could they be seen as on the cutting edge of technology and reap the valuation benefits? Of course.

But it requires some shifts in attitude.

It requires the firm to set lofty goals in their innovation efforts, it can’t be incremental. They also need the courage to share these innovation dreams with the market and own them publicly. It also requires the vision to shift investment from traditional marketing and advertising budgets into innovation arenas and moonshot product developments. All of which can not only become an exponential product improvement, but be an effective form of advertising in the interim. But mostly, it will send a strong message and provide a new confidence to the firms customers, employees and investors that they have a chance at inventing the future too.

Digital Nostalgia

Posted on by Steve Sammartino

Digital technology has a wonderful way of allowing that which was lost to re-emerge. Before we had the ability to make and publish whatever we please, tastemakers always focused on the next new thing, obsessed with selling to the ‘youth market’. Yesterday’s ideas would make their way from the shelf to the bargain bin, and finally be consigned to our fond, yet fuzzy, memories. Nostalgia used to be a few dusty ideas in sepia confined to an antique shop. Fast forward to 2018 and nostalgia is ironically, very now. It’s attracting big bucks from the people who have it, and it might just be the biggest marketing opportunity for people and brands with the wisdom to see it.

We entering an era I call the Dichotomy-Economy. Many markets are splitting into two clear juxtaposed segments: Fast food and Slow food, Discounters and Luxury brands, and to the growing list we we can add Neo and Nostalgia. Never have we seen such a rapid uptake of new technology in history. While we love it, it’s an exhausting, never-ending journey just to keep up. That’s where nostalgia comes in. It’s the metaphorical roadside rest area in an era of exponential change. The panacea we need to a future moving at light speed.

Ask anyone older than the ‘Snapchat demographic’ and it’s a world of old VHS tapes uploaded to YouTube, digital pictures of analogue photos scanned onto social media and Google searches of that thing you loved growing up that you just have to find now. There’s nothing grownups (as my kids call us) love more than buying the things we grew up with or the fantasy toys we could never afford. Notable nostalgia plays from the mainstream, including:

And if they aren’t cool enough for you, check out my 80’s TV, a simulated TV channel taking shows uploaded from the web and creating an actual 80’s TV channel with news sport, advertisements you name it. Just choose your year and off you go.

My friend Scott has tapped into the cult of 1970s and 1980s Aussie Rules footy by running an art-meets-ecommerce project – a limited edition run of old style lace-up footy jumpers. And it’s booming.

This is exactly the point. The reason nostalgia can make such a big comeback (pun intended) is that we have the tools at our disposal to promote something, we can outsource manufacturing and a connected world means that the niche can often survive with thin, yet global distribution.

If you’re a company, brand or individual looking for a high margin future, then maybe it’s the past you should look into.

Equity, tokens and working for free

Posted on by Steve Sammartino

Ten years ago I used to get offered equity to work for free, now I get offered tokens in upcoming ICO’s. I used to say yes to many equity offers if:

(A) I liked the project

(B) I liked the people

As you can imagine most of these projects never went anywhere. I’ve now got many 1% shares in imaginary companies that no longer exist. I’d hazard to guess many ICOs are also going to end up as Imaginary Cash Only.  So should you accept such an offer from some cool people? Well, it really depends on why you’re doing the work. If it’s for experience, then why not? Think of it as part of your ‘free education’ in industry XYZ. Many of the most valuable things I’ve done in my career started out in the free zone.

My approach today however, is a little different. Here’s how a decide whether or not to work for non cash payment:

If I wouldn’t invest my own money in that startup or activity, then I wont accept non-cash payments. Why – because they are essentially the same thing. We are handing over money to the project or company.

Another thing worth considering is why the person on the other side of the equation would give away equity for labour. If they truly believe in their project, why are they so eager to give up equity? It’s certainly worth asking them that question.

In my experience smart entrepreneurs ask for money, not free labour. Especially when money follows good ideas, strong teams, and that managing free labour adds friction and complexity to the project or startup itself.

Your work is worth more than you think, Steve.